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Equipment Leasing

Category: State Incentives, Grants & Loans


DESCRIPTION: Leasing is an alternative to purchasing general equipment, furniture, medical equipment, office machines, typewriters and computers.
ELIGIBLE USE:
• Leasing provides the following benefits:
• A tax advantage through accelerated depreciation;
• Frees up cash for other uses;
• Allows lines of credit to be used for other purposes;
• Provides a hedge against equipment obsolescence; and
• Provides a method of spreading the cost of equipment purchases over the use full life of the equipment.
PROGRAM/LOAN STRUCTURE:
• Operating lease: The term is shorter than the expected useful life of the lease. This type of lease is popular for high-tech equipment because short-term leases help equipment users prevent equipment obsolescence.
• Finance lease: The term is longer and matches the useful life of the equipment. The rental rate is usually lower because of the longer term and less residual risk.
• Sale-leaseback: Equipment is purchased, used for a period of time and sold to a lessor. The equipment is subsequently leased from the lessor, freeing up operating capital.
QUALIFICATION CRITERIA/COMMENTS:
• Interest rate, tax consequences and end use of equipment should be taken into consideration before leasing.
• One site for some additional information is http://www.elaonline.org/.


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