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- Conserve Working Capital - the cost of equipment is not paid out in cash, which can be used for future growth and expansion.
- 100% Financing - Unlike conventional bank loans, leasing does not require large down payments or compensating bank balances.
- Preserve Credit Lines - Leasing leaves your existing bank and credit lines untouched for other business requirements.
- Overcome Budgetary Restrictions - Lease payments may be treated as operating expenses, leaving your company's capital budget intact.
- Protect Against Obsolescence - Since you do not own the leased equipment, you will never be stuck with equipment that is technologically outdated.
- Provide Inflation Hedge - Leasing allows you to pay for tomorrow's equipment use based on today's un-inflated dollars.
- Improve Financial Reporting - Operating leases need not be capitalized in your financial statements, and will not appear in your firm's balance sheet. With a lower asset base your return on assets is higher.
| Leasing | Bank Loan | Cash Purchase | |
| Advantages |
100% financing Conserves capital Can lessen tax liability Preserves bank lines Flexible terms Hedge against inflation Obsolescence protection Fixed term and payments Full use without the troubles of ownership Creates new credit source Easy add-on / upgrade Builds customer relationships |
Direct ownership Depreciation Appropriate when bank lines remain untapped, or if there is a loan covenant requirement |
No finance charges Direct ownership Depreciation Appropriate when lacking investment alternatives for excess cash, or annual depreciation expense exceeds annual expenditures |
| Disadvantages | Non-cancelable agreement |
Capitalizes equipment Relatively short term Extensive documentation Covenant restrictions Exhausts credit lines Not all charges can be financed No protection from obsolescence May require compensating balances, down payment, or origination fee |
Attacks cash reserves Negates time value of money Reduces investment leverage No hedge against inflation No obsolescence protection |
