Commercial Appliance, Ltd.

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THE POWERFUL LOGIC OF LEASING

Leasing has been gaining steadily in popularity for several years. The reason for this is simple: Leasing makes dollars and sense!

Leasing means immediate use of equipment with no capital outlay, thereby, conserving capital funds rather than freezing them. Since profit on equipment is based on use, not ownership, leasing can improve cash flow by generating increased productivity and sustaining liquidity of capital funds. Break the monthly lease rate of a piece of equipment down to a daily figure and compare it to the daily income that the equipment will generate and you will clearly see the benefit of leasing.

Lease payments can qualify as an "operating expense" and may be written off 100% as such against income taxes. Compare this to purchasing equipment, where all you can write off is the interest on the loan, and you have to depreciate the equipment over seven years! Furthermore, because of it’s short term nature, leasing guards against obsolescence and inflation. After all the lease payments are made ownership of the equipment can pass on to you, if desired, or even better you can lease a new more productive item to replace it and avoid the possibility of expensive repairs.

Why would I lease rather than buy?

Leasing conserves working capital: Leases require a very low down payment (typically first and last months payment) rather than investing cash in hand on assets which depreciate, leasing allows the operator to acquire the use of assets and retain cash for investing in operations.
Leasing can improve balance sheet appearance and leasing returns: Leasing is considered "off balance sheet financing". The balance sheet will not reflect a large amount of debt associated with the assets that have been leased.

 

How does American Express determine if I am eligible for financing?

Several factors will determine whether your business qualifies for our business lease.
Time in business,
Personal credit on the owners / officers,
Bank and trade references,
Payment history with creditors,
as well as type of equipment you are considering leasing.

What are the problems with leasing?

Some problems are universal to business and can not be escaped such as: high risk due to prior business failures, no operating experience, or demonstrated inability to pay. A person obtaining a lease may find he will be financing at a higher rate of interest than a standard bank loan. Leasing companies usually will not participate in working capital. They lease assets. Lack of ownership may or may not be a problem, it all depends on how you view assets. Typically, leases do not pass ownership to the operator until the end of the lease. This may be a problem if a company is ownership oriented. Although a lease may be paid off early there are limited benefits to this. It is not a daily principal & interest scenario. It may be best to go with a shorter term with the aforementioned scenario.

Are there any tax ramifications?

Leases are categorized for tax purposes as either operating or capital in nature. Lease payments under an operation lease are deductible as made-(Fair Market Value leases, Prime Rate leases). Capital leases ($1 buy-out) are treated as any other hard asset, the property is depreciated over its established tax life. A lease can provide a faster write off of the asset than if the asset were purchased, leading to lower taxes. Consulting your tax professional or CPA prior to entering a lease transaction is always a good idea.

Leasing Provided By:

 American Express Business Finance

600 Travis Street, Suite 1400 Houston, TX 77002

1-800-745-9292

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Information Request Form

If you would like more information on leasing equipment please fill out the items below and we will get back to you with a firm quote. Be sure to list the items that you want to lease below.

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Contact Information

Telephone
(920) 731-6060
Toll free 1-800-481-7373
FAX
(920) 731-6109
Postal address
Commercial Appliance, Ltd.
123 N. Douglas Street
Appleton, WI 54914-3476
Electronic mail
General Information: mail@commappl.com
Sales Information: sales@commappl.com
Service Information: service@commappl.com
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Last modified: November 29, 2002

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