Frequently Asked Questions
There are a number of advantages
that make leasing an attractive option for many firms. These
include the fact that leasing offers fixed regular payments,
provides financing for 100% of the equipment cost, allows businesses
to pay for equipment as it is used to generate income, conserves
both working capital and lines of bank credit, and may offer certain
Who can lease?
Any company, organization or
association. The leasing company cannot lease equipment to an
individual for personal use.
Who owns the leased
The leasing company, as the
lessor, is the owner.
What is the process for
The leasing company reviews the
credit information supplied on the lease application. Upon
approval, the lease agreement is prepared by the equipment dealer,
the lessee, or the leasing company. When the equipment is
delivered, the leasing company pays the dealer and begins billing
the lessee for the agreed upon lease payments.
How does the lessee
account for the lease?
The lessee's accountant should
determine the best tax treatment for his client.
How are lease payments
The monthly payment is based on
the term of the lease, cost of the equipment, and the type of
leasing plan the lessee chooses. The initial term of a lease
runs from 12 to 60 months.
What factors are used to
determine credit worthiness?
Type of business, length of time
in business, financial condition, references from financial
institutions, and D&B of other credit bureau ratings.
Can the lease be canceled?
Usually, no, but equipment can be
traded-in for new leased equipment before the expiration of the
initial term. The leasing company also offers a special rate
for those requiring a "buy out" option during the term of
Can equipment be purchased
at the end of the lease?
Yes. The lessee has the
option of continuing to lease, purchasing the equipment, or
returning it to the leasing company. At lease-end, the leasing
company will also offer to finance the purchase price of the
equipment for the lessee's convenience.
What about sales and use
The leasing company will invoice
the lessee for the appropriate tax.
Who should sign the lease?
The lease should be signed by an
authorized officer of a corporation, by one of the partners of a
partnership, or by the owner of a sole proprietorship.
Who services of maintains
The lessee is responsible for
maintenance and receives the benefits of all "buyer"
What about insurance?
For the protection of both the
leasing company, as owners of the equipment, and of the lessees, who
need the equipment for their business operation, the leasing company
requires that the equipment be insured. Insurance is available
through the leasing company, or can be provided by the lessee's
What effect does leasing
have on the lessee's bank line of credit?
Established bank lines are
unaffected and can be better maintained for day-to-day working