The Growth of the Equipment Leasing Industry has been fueled by the insatiable requirements for capital by all forms of business and governmental entities. This year the forecasted North American sales volume data for the leasing industry is in excess of $250 Billion. This figure represents more than one-third of all business investment in equipment. The cur-rent economic climate has the increased the utilization of leasing in order to conserve cash and credit lines for other key business uses.
Leasing has become the preferred single financing method for the acquisition of equipment and services. The reasons for the industry growth are focused on the financial, structural, and creative benefits that are available through leasing. The following concepts highlight some of the advantages that make Can Lease/Leasing direct leasing and vendor financing programs benefiting the customer:
Leasing brings a new line of credit to the organization, thus preserving existing lines for other main stream uses. In the current economic situation most organizations are managing their lines very carefully. And, in the cases where the lines have been reduced or frozen, leasing can permit capital asset acquisition that is fundamental to the growth and profit-ability of the organization. In many cases leasing offers the organization the opportunity to maintain the highest level of service to their clients, residents, or citizens when capital funds are simply not available.
Leased assets are usually simpler for the user to acquire. Leasing decisions can avoid the cumbersome processes that are mandated for owned capital assets through the capital expenditure budget. As leases have fixed equal periodic payments cash flow projections are easily made compared to the depreciation and amortization schedules required of capitalized assets. Assets acquired through leasing have far less paperwork than those acquired through conventional bank financing.
EASE OF ACQUISITION
Acquiring an asset for operational use can entail expenses beyond the cost of the item. Shipping expenses, Installation charges, site preparation expenditures, training, and displacement costs can be included in the lease. This eliminates the several one-time cash outlays and down payment typical in asset acquisition situations. By folding these costs into the lease the lessee may better deploy its cash or savings into more profitable uses and current working capital requirements. And, all of these costs are billed on a single monthly invoice.
DIVERSIFICATION OF FINANCING SOURCES
Leasing brings new and additional sources of capital to the user. The lessees existing credit facilities are untouched and preserved for future use. Our economy has always experienced major swings in the availability of conventional financing. Commercial banks have limits on the amount of lending that they may offer to any single customer. Most lessees are aware of these facts and welcome additional sources of capital in order to avoid the limitations created having too few financing resources. Can Lease and its affiliates continuously monitor the money market for capital availability. In the current unsettled market we are all too aware that banks, credit companies, and insurance companies can be out of the market on a moment’s notice. Today, the wisest and most prudent approach to capital access is to have a multiplicity of funding sources. That is what we offer the lessee.
FINANCIAL REPORTING REASONS
Many companies chose equipment leasing in order to utilize the well-accepted and time-proven benefits of lease ac-counting. Leases will be booked as capital leases or as operating leases as determined by the company’s accountants. Operating leases are not required to be capitalized on the financial statements of the equipment lessee. This off-balance sheet treatment permits the lessee to avoid additional liabilities on the balance sheet with certain information simply footnoted.
Leasing is the most convenient method to acquire equipment to meet operational requirements for managers who may not have the appropriate authority to authorize a capital expenditure. However, many firms have spending authority guidelines that permit managers to commit to monthly lease expenditures. Thus leasing can facilitate the acquisition of goods and services without using the lessees capital funds and can assist in solving difficult operational situations.