Before you begin the process of leasing or financing the equipment you need for your business, KISCO can tell you about the many benefits of leasing or financing your equipment! Below are many of the benefits that you can expect from leasing or financing.
Improved Cash Flow
We specialize in providing you with a payment schedule to match your individual cash flow. Lease payments are typically lower than loan payments, which improves ongoing cash flow. Additionally, we offer a special “after harvest” payment program.
No Additional Collateral Required
Collateral and/or security in addition to the leased items is not typically required, which preserves existing conventional financing relationships.
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 all of your financing options to your advantage.
100% Financing
Typically, 100% of the cash price of an item is leased, including installation and freight, which allows cash to be invested in more revenue-generating activity.
Tax 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.
Immediate Write-Off
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
Our goal is to provide you with a lease that is tailored to fit your specific needs, including consideration for cash flow timing, fiscal year end, budget cycle, transaction structure and cyclical fluctuations.
Asset Management
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. Keep in mind that you should consult with your accountant or financial advisor for the full tax benefits of leasing.
Transfer Accommodation
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 reallocate.
Depreciation of Owned Equipment vs Leased Equipment
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.
Less Financial Information Required
Leasing usually requires less paperwork than a loan at a local bank, meaning they require less preparation and are simpler and easier to secure.
Fixed Payments
Leasing is not subject to interest rate fluctuations. The payments are negotiated upfront and stay fixed for the term of the lease. This allows for easier cash flow projections and budgeting for future years.
Various End of Term Lease Options
When you lease a piece of equipment, you have several options when the lease reaches maturity. You can purchase the equipment for a pre-determined fixed amount, renew the lease or return the equipment at maturity. Purchase options are pre-set at the commencement of the lease and can range from as low as $1 to 50% of the original cost. Remember that the higher the residual, the lower the rental payments are over the term.
