Financing Options

What are some advantages of these types of leases from Industrial Equipment Capital?

Capital leases

A lease to purchase, or a finance lease, as it is more commonly known, is a transaction where the equipment can be purchased by the lessee for a pre-determined dollar amount at the end of the lease term. In most lease scenarios, this option is $1.00 or $101.00. In this lease scenario, tax benefits such as expensing depreciation and interest are passed on to the lessee.

Allows you to pay monthly payments and conserve cash flow

Tax benefits (depreciation benefits based on the tax laws for that year)

Allows you to finance with a source other than your financial institution, and leaves lines of credit and the ability to borrow from your local bank more accessible

Simple paperwork: unlike a mortgage, our paperwork is less than 10 pages

Lessee can get into this type of lease with little or no cash outlay and finance for up to 7 years

Fixed payment with a fixed rate so that you are not affected by the current volatile market conditions.

Operating Leases

Like a capital lease, an operating lease is a transaction where the equipment can be purchased for a pre-determined dollar amount at the end of the lease term. Normally, this can be stated anywhere from 5% to 25%. The lessee at this time has the option to (1) return the equipment back to the lessor, (2) exercise the option, or (3) refinance the option. Benefits include:

Lower monthly payments than a capital lease

Conserves cash flow

Possible tax benefits (off balance sheet possible, too)

Can be used as a tool if a company has used all of their capital expenditure budget as this could be used as a rental(please consult a tax advisor to determine what your actual tax benefits are)

Tax Leases

A lease that used to be off balance sheet to stay away from leverage issues, covenant issues, to help better cash flow and to not show an ownership position. Some of the benefits are:

Lessee has a fair market value(FMV) option at the end of the lease term with 3 options: (1) return the equipment back to the lessor, (2)exercise the option, or (3) refinance the option

Lower monthly payments than capital lease and operating leases

Conserves cash flow

Off balance sheet lease (entire monthly payment is expensed)

Can be used as a tool if a company has used all of their capital expenditure budget as this could be treated as a rental for balance sheet purposes

Assists in economic and technological obsolescence

Loans

Set up exactly like a capital lease except there is no purchase option at the end of the term. It is a security agreement that IEC Financial would finance for a fixed period, with a fixed rate. Like a capital lease, the debtor is entitled to depreciation benefits and interest expense write-offs. The amount owed shows as a liability on your balance sheet. Rates are conveyed on note as are the pre-payment clauses.

Rentals

Short term leases that can assist in bypass budgets, waiting for future budgets or to get equipment in for short term projects. Can be as short as 6 months and up to 2 years.