Leases

Who Leases Equipment?

         Eight out of ten American companies lease all or some of their equipment. Each year
   more companies, particularly small companies, choose to procure new productive
   equipment through leases rather than loans.
         Companies that lease tend to be smaller, growth and technology oriented organizations.
   According to the Equipment Leasing Association, leasing continues to be the most widely
   used method of asset based financing in the US, accounting for approximately one third of
   the external financing of capital investment.

                                Leasing survey questions and results:

                                Do you currently lease business equipment?

                                No - 15%
                                Not sure - 0%
                                Yes - 85%

                                What kinds of equipment do you lease?

                                Fleet vehicles - 18%
                                Printing & Imaging - 8%
                                Photocopy - 26%
                                Phone system - 24%
                                Computer - 16%
                                Other - 8%

                                If you have leased equipment, will you lease again?

                                No - 11%
                                Yes - 89%

                                What leads you to lease instead of buying?

                                Ease, convenience, flexibility - 13
                                Latest technology - 9%
                                Taxes - 13%
                                Maintenance options, cost - 13%
                                Dollar value - 17%
                                Cash flow - 35%

                                On a scale of 1-5 how would you rate leasing ?

                                5 (Best) - 13%
                                4 - 24%
                                3 - 37%
                                2 - 13%
                                1 - 13%

                                What type of business best describes your company?

                                Wholesale, Retail - 38%
                                Manufacturing - 24%
                                Service Provider - 38%

Equipment Leasing - Virtually every business can benefit from leasing just about any type of
                                      equipment, new or used. Leasing is an alternative form of financing. At
                                      the end of the lease, the lessee can purchase the equipment or give it
                                      back to the lessor and begin a new lease or walk away.

Assignment Leases - The assigned lease as security is similar to the guarantee. It is used
                                       in some franchise situations. The bank lends money on a building and
                                       takes a mortgage. Then, the lease for which the dealer and the parent
                                       franchise company worked out is assigned so that the bank automatically
                                       receives the rent payments. In this manner, the bank is guaranteed the
                                       repayment.

      Sale-Leaseback - In lease purchase agreements, the property can be new or used. It is sold
                                       to a lease company who in turn leases it back to the original owner or the
                                       intended user. The lease purchase arrangement can be used for the
                                       acquisition of equipment, real estate and entire businesses as part of
                                       acquisition financing.

If you don't understand the difference between a lease and a loan, you are not alone. Many business
owners continue to finance their equipment the "old fashioned" way, through loans, because they
don't fully understand the potential benefits of leasing their equipment. These benefits can be seen
in four important areas, initial cost, equipment obsolescence, tax benefit and off balance sheet
financing. Because of these benefits, many business owners are realizing that they do not need to
own their equipment in order to conduct business. They only need to use it.

The first thing you need to know about equipment leasing is that it is 100% financing. Because a
lease is essentially a "rental" of equipment, there is usually no down payment required to access the
equipment your business needs. This directly contrasts most commercial bank equipment loans,
which require a minimum of 10% and as much as 50% down payment. By comparison, most
equipment leases will require only the first and last payment in advance of delivery. Even if you only
need a small amount of equipment, this can result in a tremendous reduction in the "out of pocket
expense" necessary to upgrade your equipment. This gives you the opportunity to put thousands of
dollars of working capital back into your business, instead of giving it to your banker.

Another benefit of leasing your equipment is the ability to avoid "economic obsolescence". This occurs
when a business equipment either cannot keep up with the demands of the market or lacks the
technology to help the business remain competitive. Leasing your equipment helps to avoid
obsolescence by allowing you to upgrade every few years. In other words, if the equipment
appreciates, buy it. If the equipment depreciates, lease it.

In addition to the initial cost and obsolescence, leasing your equipment can also provide your
business with a substantial tax advantage. While you should always consult with your tax advisor first,
most equipment leases can be structured so that you can write off 100% of the annual lease
payments. By contrast, current tax laws only allow a business to write off the interest paid on loans.
However, because a lease is a rental and the business is only using the equipment, the business
can usually write off all of the monthly lease payments just like any other legitimate business expense.
Once again, this can result in thousands of additional dollars in working capital being put back into
your business.

The last major advantage of leasing your equipment instead of buying is that leasing allows you to
not show the equipment on your balance sheet. Once again, this is because the equipment is being
rented and therefore actually belongs to a different company than the one that is using it. For this
reason leases are often referred to as "off balance sheet" financing and this can be a tremendous
advantage to many businesses both large and small. Big businesses prefer this option because they
don't want to own millions of dollars in equipment. This equipment will depreciate substantially with
the day-to-day usage. Whoever owns the equipment is responsible for the depreciation on their
balance sheet. Also, large corporations may require that the board of directors approve any new loans
to the business since. This can make it difficult for the management of the business to operate
efficiently. But a lease is not a loan and therefore may not require approval by the board for the
managers to get the equipment they need. In smaller businesses this can also be an advantage
because they will not show additional debt on the balance sheet that will affect their ability to borrow
money in the future. If you are considering selling your business, this may also make your company
more attractive to potential buyers since you will be showing less debt on the balance sheet.

Because your Business Finance Consultant works with many leasing companies nationwide they
can help you determine if leasing your equipment is right for your business. If you should decide to
lease, they can usually get the equipment you need with just a simple, one page credit application.
In many cases they can have the new equipment on site in as little as a few days.

New Visions Financial
Group Inc.

Leases