AMERICAN INDUSTRIAL LEASING COMPANY
Why Lease?
1) Purchasing power. Lease financing allows you to acquire more and/or higher-end equipment.
2) Balance sheet management. Certain types of leases help you better manage the balance sheet and improve the overall financial picture, by conserving operating capital and freeing up working capital and bank credit lines for inventory, expansion and emergencies.
3) 100 percent financing. With leasing, there is no down payment. The term of the lease can be matched with the useful life of the equipment.
4) Asset management. A lease provides the use of equipment for specific periods of time at fixed payments. It assumes and manages the risks of equipment ownership. At the end of the lease, the lessor disposes of the equipment
5) Service additions. Many lessees choose to structure their leases to include installation, maintenance and other services, if needed.
6) Tax treatment. Leasing offers the opportunity to deduct 100 percent of the lease payment as a business expense. You should contact your accountant for the proper treatment of this expense item.
7) Upgraded technology. Leasing provides companies with the ability to keep pace with technology. The lessee can upgrade or add equipment to meet ever-changing needs.
8) Specialized assistance. Lessors are specialists in equipment leasing and financing, and understand capital equipment markets.
9) Flexibility. There are a variety of leasing products available, allowing the lessee to customize a program to address needs and requirements – cash flow, budget, transaction structure, cyclical fluctuations, etc.
10) Proven equipment-financing option. Over 30 percent of all capital equipment in the United States is acquired through leasing. In fact, eight out of ten companies lease their equipment.
What is the Difference between a Lease and a Loan?
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No Down Payment: A lease requires no down payment and finances only the value of the equipment expected to be depleted during the lease term. The lease usually has an option to buy the equipment for its remaining value at lease end.
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A loan requires the end user to invest a down payment in the equipment. The loan finances the remaining amount.
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No Collateral Needed: The leased equipment itself is usually all that is needed to secure a lease transaction.
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A loan usually requires the borrower to pledge other assets for collateral.
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No Big First Payment: A lease requires only a lease payment at the beginning of the first payment period which is usually much lower than the down payment.
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A loan usually requires two expenditures during the first payment period; a down payment at the beginning and a loan payment at the end.
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No Risk of Obsolescence: The end user transfers all risk of obsolescence to the lessor as there is no obligation to own the equipment at the end of the lease.
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The end user bears all the risk of equipment obsolescence because of new technology.
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Tax Deductible: When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. The equipment write-off is tied to the lease term, which can be shorter than IRS depreciation schedules. This results in larger tax deductions each year. The deduction is also the same every year, which simplifies budgeting.
(Equipment financed with a conditional sales contract is treated the same as owned equipment).
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End users may claim tax deduction for a portion of the loan payment as interest and for depreciation which is tied to IRS depreciation schedules.
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Back-End Cash Flow: More of the cash flow, especially the option to purchase the equipment, occurs later in the lease term when inflation makes dollars cheaper.
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A larger portion of the financial obligation is paid in today’s more expensive dollars.
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Better Bottom Line: Leased assets are expensed with the lease payment in an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios.
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Financial Accounting Standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet.
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How do I determine what type of lease is best for my company?
As a method of acquiring equipment, you’ll find leasing very straightforward: It amounts to a rental agreement that is structured to meet your company’s special needs. As the lessee, you and American Industrial Leasing consider the following factors to determine the most effective type of lease for your company. These factors include; how long you want to use the equipment; what you intend to do with the equipment at the end of the lease; your tax situation; your cash flow; and your company’s specific needs as they relate to future growth.
Further, your needs will also determine what happens at the end of the lease. As a lessee, your options include: returning the equipment to us; purchasing the equipment at fair market value or a nominal fixed price; or renewing your lease.
What is the typical process for leasing equipment?
You start by filling out an easy one page credit application. Depending on the amount needed and other factors, we may request additional information such as financial statements and/or tax returns. The credit information is processed and upon approval the lease documentation is sent to you for signing. Once we receive the documents back, a purchase order is sent to the vendor. Upon delivery and acceptance of the equipment by you, the vendor is paid and your lease commences.
Who can lease equipment?
Any type of business organization.
Does the equipment have to be new?
No, many types of used equipment can be leased.
How long is the credit approval process?
Depending on the size of the transaction and credit information readily available, applications can be approved in as little as 1 to 2 hours.
Can we lease equipment that we already purchased?
Yes! A sale-lease-back can be processed for equipment purchased within the last 90 days.
Is the lease cancelable?
No, a lease is a non-cancelable contract. However, you can upgrade or add-on equipment at anytime.
What kind of fees are involved?
American Industrial Leasing absorbs the costs of processing the application. There is a small documentation & UCC filing fee depending on the complexity of your lease. The fees typically range from $75.00 to $250.00.
Is there a down payment required?
No. Typically we require two equal payments at time of signing of the lease documents. One payment is applied to the first month’s rent when the lease commences. The other payment is a refundable security deposit.
When does the lease start?
The lease starts once you take delivery of the equipment, have signed the Equipment Acceptance and completed our verbal verification process.
Is there a minimum time in business required for approval?
Typically we like to see a minimum of two years in business. There are exceptions to this rule. You should contact us by e-mail or phone to discuss your own unique circumstance.
What happens at the end of the lease?
This is usually agreed to at the beginning of the lease. See Lease Types/Structures.
Insurance?
It is required that the equipment be insured. All that you need to do is contact your insurance agent to have us listed as an additional insured loss payee for the equipment. Your agent will then send us a certificate of insurance. You also have the option for us to arrange insurance for you.
What types of equipment do you lease?
Anything that is used in your business operations.
Are lease payments a tax write off?
This depends on the type of lease you choose. You should discuss this with your accountant to ensure that you can write off the lease payment as an operating expense.
How do I apply?
You can apply on-line or use our downloadable application and fax to our office. You may also contact us by phone and one of our sales representatives can take the information and submit it for you.
Do you lease software, installation and services?
Yes. All aspects of your equipment installation can be included in your lease.
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