Benefits and Advantages of Leasing

Leasing Program

• Flexible Terms • Easy Closing • Fast Funding • Preserve Business Credit • Save Cash • Better Balance Sheets • Avoid Outdated Equipment

Benefits of Leasing include:

  •     Cash Flow – By making monthly payments, businesses can pay for the equipment with the improved cash flow generated from their new technology.  Leasing affords a variety of options to match payment terms to business flow of cash, whether cash flow is project-based, seasonal, related to expansion, etc.
  •     Obsolescence Protection – Leasing allows you to match payment plans to the equipment’s expected useful life.  Leasing provides flexibility at the end of the term to allow you to either take ownership of the equipment or walk away and acquire new technology.
  •     Tax Treatments and Benefits – You may be able to write off 100% of your lease payments from your corporate income because the IRS generally does not consider an operating lease to be a purchase.  Please consult your accountant for the exact application for your business.
  •     100% Financing – Leasing typically does not require a large down payment and you can finance up to 100% of the equipment cost.  In many cases service, supplies, installation, warranty and other soft costs can be included in the lease.  This gives you more money to invest in other revenue-generating activities and makes it easier to afford multiple products or just save it for times when you need cash most.
  •     Speed – In most cases, PAC-FUND PARTNERS can approve businesses up to $250,000 in equipment lease financing with a one page credit application. Approval can usually be secured in less than 24 hours.
  •     Preserve Cash and Bank Lines – Preserve cash and bank lines by using equipment leasing as an alternative form of financing specifically for capital equipment.  Use this financing option to maximize liquidity and access to capital by preserving cash and bank lines for other business needs.
  •     Strengthen Company Credit – Most of our Financing lines are tied to the business and will not be reflected as leverage on your personal credit report.  As an alternate result, our financing lines will build-up and strengthen your business credit as we report the positive pay history you establish.

The Advantages of Leasing vs Financing

When considering whether to do an equipment lease or use a bank loan to fund your equipment purchase, it is good to consider the following items to make an informed decision:

  •     Information Needed for approval:  Our Equipment Lease approval process usually requires a simple one page credit application we use to approve a company up to $150k. A bank will require a full financial package including two years corporate and personal tax returns, personal financial statement, and interim financials.
  •     Time it takes to get an approval:  Our streamlined credit approval process can yield a decision within 24-48 hours. A bank has to sift through the stack of financial information before they can make a lending decision and this can take usually take weeks. You will be using your new equipment funded by PAC-FUND PARTNERS before a bank can even give you an approval!
  •     Down Payment Requirements:  Most of our equipment leases require only one or two payments in advance, which are usually applied to your lease payments. We also do 100% financing, so you do not have to come out of pocket for your equipment. Banks can require 10-25% down from the borrower. They do this to minimize their exposure and risk in the loan. This high deposit requirement can significantly hurt the cash flow of a company who is relying on the new equipment to increase their revenues which can take a few months.
  •     Payments and Rate Structure:  All of our equipment lease programs are fixed rate and payments for the term of the lease. Bank loan rates are usually variable. This means your rate and payments will change based on market conditions, which makes it challenging to budget for your loan payment each month.
  •     Security:  Equipment leases typically only require a lien on the leased equipment. Banks tend to place blanket liens on a business, which includes all of the assets, receivables, and inventory. This filing gets reflected publicly as a UCC filing. Who wants to put up that much collateral to finance once piece of equipment?
  •     A bank loan may also contain restrictive covenants on a business which requires that business to maintain certain financial ratios during the term of the loan. If those requirements are not met, the bank may call the loan. Equipment leases typically only require timely payment of the lease and do not place these unnecessary covenants on the business.
  •     Tax Advantage:   Equipment leasing is a great tax write-off as you may be able to expense the entire lease payment. This “off balance sheet financing” option allows a business to reduce their net income by increasing their rental expense on an income statement, drastically lowering their tax liability. Banks break out the principal and interest on an equipment loan, so a business may only deduct the interest and a small percentage of depreciation. A bank loan will not yield as much of a tax write-off as an equipment lease.

2017 Section 179 Deductions

What has Changed?:

  • The deduction limits have changed for all 2017 qualifying equipment!
  • The deduction limit for Section 179 is now $500,000.
  •     This means that if your customers buy (or finance) a piece of Equipment, they can deduct the Full Purchase Price (up to $500,000) from their gross income.
  •     The old limit was $25,000.
  • The 2016 Section 179 deduction threshold for total amount of equipment that can be purchased is now $2,000,000.
  •     This means that customers can purchase more equipment and still have the benefit of the Section 179 deduction.
  •     The old limit was $200,000.
  • 50% bonus depreciation has been reinstated for the tax year 2016 and extended through 2019.
  •     For equipment purchases over the Section 179 deduction of $500,000, your customers can deduct an additional 50% of the amount over $500,000 in addition to their standard depreciation deduction. This applies to equipment acquired and put into service during 2016 and 2017. Then bonus depreciation will phase down to 40% in 2018 and 30% in 2019.
  •     The old limit was $0.
  • Please Note:
  • Section 179 Deduction is available for most new and used capital equipment, and also includes certain software. Bonus Depreciation can be taken on new equipment only (no used equipment, no software). When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation – unless the business has no taxable profit in the given tax year.
  • Successful businesses take advantage of legal tax incentives to help lower their operating costs. The Section 179 Deduction is a tax incentive that is easy to use, and gives businesses an incentive to invest in themselves by adding capital equipment. In short, taking advantage of the Section 179 Deduction will help your business keep more capital, while also getting needed equipment, vehicles, and software.