Financing > The Benefits of Financing

Top 10: Why Leasing Is Better Than Bank Loans

LEASING: A Contract Extending Over a Fixed Term

Advantages

  1. 100% Financing
  2. Conserves Capital
  3. Can Lessen tax liability
  4. Conserves bank lines
  5. Flexible Terms
  6. Hedge against inflation
  7. Obsolescence protection
  8. Fixed terms & payments
  9. Full use without ownership
  10. Creates new credit source
  11. Easy Add-on/trade up
  12. Builds customer relationships

Disadvantages

  1. Agreement that is non-cancelable (However, lease may be assigned over to new owner & equipment upgrades may be done.)

BANK LOAN: Installment Payments

Advantages

  1. Direct ownership
  2. Depreciation
  3. Appropriate when bank lines
  4. Remains un-lapped or there is a loan covenant requirement

Disadvantages

  1. Capitalizes equipment
  2. Relatively short term
  3. Extensive documentation
  4. Covenant restrictions
  5. Exhausts credit lines
  6. Non-financeable charges
  7. No obsolescence protection
  8. May require: Compensating balances, down payment and organization fee

CASH PURCHASE: Using Working Capital For Acquisition

Advantages

  1. No finance charges
  2. Direct Ownership
  3. Depreciation

Disadvantages

  1. Attacks cash reserve
  2. Reduces investment leverage
  3. No hedge against inflation
  4. No Obsolescence protection