Tax Treatment and Benefits
Appropriately structured leases are considered a tax-deductible expense, which allows you to deduct, for tax purposes,
the entire amount of the lease payment from your gross income.
Typically, 100% of the cash price of an item is leased, which allows cash normally used for a down payment to be invested
in more revenue-generating activity.
No Additional Collateral Required
Collateral and/or security in addition to the leased item is not typically required, which preserves existing conventional
Cash Flow Preservation
Since no down payment is required, working capital is preserved. In addition, lease payments are typically lower than loan
payments, which improves ongoing cash flow.
Leasing matches equipment cost more closely with its use. Additionally, agribusiness's and sophisticated farmers make
evaluations based on revenue per unit sold vs. cost per unit. Leasing makes per unit comparisons easier than conventional
Leasing allows immediate write-off of the dollars spent. Therefore, equipment does not have to be depreciated over three
to seven years, or longer in the case of fixtures.
Flexibility and Customized Solutions
A lease can be tailored to fit your specific needs, including consideration for cash flow timing, fiscal year end, budget
cycle, transaction structure and cyclical fluctuations.
A lease provides for the use of an item for a specific time period at a fixed payment level. The client may have the option
to purchase the asset at the end of the lease for a fixed purchase option, or may decide to return the asset.
Balance Sheet Management
A properly structured operating lease may be off-balance sheet. Thus, liabilities are not increased on the balance sheet
and financial ratios typically improve.
Leasing can be used to transfer ownership of an asset at the end of the lease period to a designated heir, saving on estate
taxes. Additionally, any ownership changes to a partnership and/or joint venture during the term of the lease are easy to
Depreciation deductions for owned equipment follow a predetermined schedule. For example, the tax life of movable
agricultural equipment totals seven years. It takes eight years to write off the entire cost of the equipment With a lease,
you expense the value of the equipment over the term of the lease, usually five years. The shorter write-off period means a
larger deduction each year and lower taxable income.
Access an Alternative Credit Source
Many organizations use a line of credit for operating purposes, and a lease for equipment. Establishing a lease line of
credit for equipment diversifies your credit sources, allowing you to use alt of your financing options to your advantage.
You should consult an accountant on which type of lease is right for you.
What We Can Do On Used And New Equipment:
• Standard - "True Lease" with a 10% purchase option
• Finance Lease - with a $1.00 purchase option
• TRAC Lease - (Terminal Rental Adjustment Clause) on anything self-propelled or titled
• Master Lease - a line of credit
• Municipal Lease - For any municipality (town, city, township, country or state agency)
• Consolidation Financing, Refinancing or Sale - Lease backs
• Regular Payments - monthly, quarterly, semi-annual or annual
• Irregular Payments - skip months, seasonal, harvest plan, tax plan (with payments due
Dec 31st or Jan 1st) step-up or
• Terms - 2 to 7 years
• Residuals - From $1.00 to 50% depending on the type of equipment and the term
TYPES OF EQUIPMENT - Up to 15 years old
Agricultural - combines/harvesters, tractors, short line, metal buildings, irrigation systems, engines, grain bins,
haying equipment, etc.
Trucks & Trailers - pickup trucks, over the road trucks & trailers, short haul, dump trucks, concrete trucks,
grain trucks, feed mixer trucks, etc.
Commercial - computers, construction, forklifts, industrial, machine tools and robotics, medical, printing, skid-steer loaders, etc.