In order to accommodate the unique needs of individual businesses, there is more than one type of leasing contract available. When trying to determine which of these is right for your business, consider factors such as how much liquid capital you want available, what kind of payment schedule is most beneficial, what your company goals for expansion are, and more. Small businesses versus businesses that are rapidly expanding will likely require different commercial leasing options, so consider the leasing programs that offer the best benefits for your company. Before you can determine which type of leasing is most appropriate for your business, you need to know the different options available and what type of business each plan is most beneficial for.
The Different Types Of Leases
Capital Lease
This type of lease is a contract where the lessee temporarily gains use of an asset while they assume the risks and benefits associated with ownership. A capital lease is treated as if the lessee owns the asset and it is considered as such for accounting’s sake. This type of lease is often best for companies that wish to own the asset once the lease is completed. Capital leasing helps make assets more affordable by using depreciation and interest deductions to offset income and offers an attractive purchase price at the end of the leasing agreement.
Operating Lease
With this type of lease, the lessee receives full use of the asset and is responsible for the condition of the asset at the end of the leasing period. Unlike a capital lease, an operating lease does not transfer the ownership to the lessee, so the leasing company retains ownership and therefore assumes the associated risks. Operating leases are considered a form of off-balance-sheet financing, so liabilities such as future lease payments do not appear on the lessee’s company balance sheets. This type of lease is ideal for those who wish to change out equipment at the end of their lease so they can continuously update their equipment.
Skip Payment Lease
As the name implies, this type of lease allows you to skip payments. Instead of paying every month, a skip payment lease allows you to determine alternate payment dates that align with busier seasons for your company when cash flow is readily available. This type of lease is useful for businesses that are seasonal or tend to experience slow months, as it gives flexibility and can be tailored to suit your business and income periods. Your leasing partner will work with you to develop a financing schedule that aligns with your company’s revenues to expenses.
Step Payment Lease
This type of lease starts at one rate and then changes to another rate, either higher or lower, after a predetermined period. Step payment leases can either be step-up leases or step-down leases. With a step-up lease, the initial leasing price is low, and once the agreed upon period passes the price increases. A step-up lease can be beneficial for businesses that are just starting and need to build initial revenue before they can afford larger lease payments. This type of lease is also common for long-term leases to account for inflation. A step-down lease is where the payments start large and then decrease after the predetermined period has passed. A step-down lease is useful for companies that want to pay off their lease quickly.
Master Lease
This is a continuing lease arrangement that gives lessees the ability to lease additional equipment under the same terms as the existing lease instead of negotiating a new lease contract. A master lease simplifies and streamlines future additions of assets. This type of lease is highly beneficial for rapidly growing businesses.
Sale And Leaseback
For this type of lease, a company already owns its equipment but then sells it to the leasing company. The equipment is then leased back to the business. Sale leasebacks are a way to create lease payments on equipment that is already purchased as a way to give a company more financial freedom even after a purchase has already been made. This type of lease is a great opportunity for someone who has already bought equipment but then decides they need more liquid capital and optimized cash flow.
Lease Line Of Credit
Once you are approved for a master line of credit, your company can use this for all leasing needs. A leasing line of credit gives you the freedom to initiate leases for different equipment with different companies until you hit your predetermined limit. Once a lease line has been established, you can use it at any time to acquire the equipment you need without having to continually reapply for credit or renegotiate terms or documents. This type of leasing contract is best for businesses that want flexibility and convenience and that are interested in leasing several types of equipment.
Find The Right Commercial Leasing With First Capital Leasing
If you’re still unsure which type of lease is right for your business, contact First Capital Leasing to speak with an experienced leasing expert. Our staff will work with you to determine the best lease for your business and create a tailored leasing plan to meet your unique needs. Whether you need vehicle leasing or equipment leasing, First Capital Leasing can find the right commercial leasing strategy to help your business succeed and grow. Operating for over 25 years, First Capital Leasing has a 95% approval rate and offers leasing approval in under 4 hours, so your business can start leasing immediately. To begin your partnership with First Capital Leasing, call 1-888-251-3644 or fill out the online contact form.
FAQ
Q: Why work through First Capital Leasing Ltd. instead of leasing my equipment directly?
A: You certainly can lease your equipment by yourself, but your supplier may not be as flexible as we are. We offer tailored financing solutions at superior rates that perfectly align with your budget and timeline.
Q: Is there a minimum and maximum lease amount?
A: The minimum is $5,000.00 and there is no maximum amount.
Q: How do I start the application process with First Capital Leasing?
A: Simply fill out this one-time online application form to partner with us for your financial solutions. First Capital can approve your application in 4 hours or less and pay your supplier in as little as 24 hours.
