Benefits of Leasing
Leasing is easy and covers 100% of the software costs. A large down payment isn't necessary. Typically, the first and last months rental payments is all that is required. In 30 days, your rental payments begin.
Possible tax savings*. If your company is in the 34% tax bracket
with a monthly payment of $500, the actual lease payment may be
reduced to $330 - that's a monthly savings of $170 ($500 x 34%)
or $2,100 annually after tax deductions. Simply multiply your tax
bracket by the payments over 12 months and this is very close to
what you will save in tax payments at the end of the year.
Flexibility. A typical lease involves payments
of 12 or 60 months. But, a unique plan may be better for you such
as 90-day deferred, step or seasonal leases. We can customize a
lease to fit your particular situation. If you choose to add-on
to the software during the lease term, we'll help.
Use inflation to your advantage. If you pay cash
for your software, you pay with today's dollars at today's value.
Through leasing, you pay with next year's inflated dollars, and
the next, and the next.
Increase profits immediately. With leasing, you
only have to cover the monthly payment for the new software to be
profitable from the first month. Leasing allows you to see an immediate
return on your investment purchase, whereas many cash purchases
could take 12, 24 or 36 months before you breakeven on your investment.
Example: A monthly payment of $500 divided by
30 days = a daily cost of only $16.67! Divide $16.67 by 8 work-day
hours to get an hourly cost of $2.36!
Preserve bank credit lines. Your lease doesn't
affect your existing borrowing limits with your bank. You still
have 100% of your credit available for other needs. Many business
use lease financing to pay for software that depreciates and use
cash and bank credit lines for things that will appreciate. A few
examples would be: purchase your building, purchase a business or
open a second location, advertise, hire more employees.
Conserve working capital. Cash isn't tied up in
overhead, it's free for income producing investments. Or, your cash
savings may be reinvested in your business to create earnings which
may reduce the net cash cost of leasing. Typically, your return
on investment is much greater than the finance charges associated
with your lease. So, make money with your money and use our lease
payment as a tax write off to offset the finance charges associated
with the lease payment. You will almost always come out ahead this
way!
Leases may have accounting benefits. You will
be able to write-off 100% of your lease payments when you lease.
Common Questions and Answers
Why lease versus paying cash? When considering financing,
many follow the business rule to invest in assets that appreciate
and finance those that depreciate. When financing assets that depreciate
such as high technology, the obsolescence risk transfers to the
leasing company. Example: $25,000 is available in cash to purchase
software. Consider the following example of investing that same
$25,000 elsewhere. Invest the $25,000 in an aggressive five year
investment with an average return of 8%. After five years, the $25,000
is equal to $36,733. Since you leased, your $25,000 cash is now
worth $36,733, a net increase of $11,733. Then,
finance $25,000 worth of software on a five year lease with a monthly
payment of $554, with ownership at the end of the finance term.
The cost to lease, ($554 x 60) = $32,640. The total finance charges
are ($7,640).
Now take into consideration your tax write offs and at a tax bracket
of 34% you get back approximately $11,424 over
the five year period in tax savings from having the lease payments,
($32,640 x .34 = $11,424).
Depending on your tax bracket and return on investments here is an approximate typical scenario of how you can use your money to invest in things that will appreciate and use the finance company's money to pay for your software and receive the tax benefits over a five year period:
 Appreciated
cash value of the $25,000
|
$11,733 |
Tax saving from leasing your software |
$11,424 |
Finance charge paid of $25,000 |
($7,640) |
TOTAL |
$15,517 |
Why lease versus a loan? A loan typically offers the most
competitive rates but depending on the size of the transaction and
the business' cash flow, a loan may not be the best choice. Bank
lines of credit are a precious commodity and leasing can preserve
those lines.
Some of the benefits of leasing include:
- No down payment required
- Does not affect your bank line of credit
- Preserve your working capital
- Fast credit decisions
- Tax advantages
- Immediate return on investment
What financial or credit information is necessary? For leases
under $100,000 and businesses established greater than two years,
usually a standard lease application is sufficient. For leases over
$100,000 we need an application in addition to your current financial
statement. If you don't have a current statement, or if it isn't
reviewed by your accountant, you may substitute tax returns. We
also have finance arrangements for businesses established under
current ownership for less than two years.
Can I stop the lease? The lease is non-cancelable.
However, we have a program that will allow you to pay off the lease
in full after the first year and receive a savings on the remaining
interest. Also, if you need new software or need to upgrade your
current software, we'll structure a new Upgrade Lease.
Can I just finance instead of lease? If you would
rather finance than lease we have a commercial finance agreement
we can use.
Please call your leasing consultant John Marrazzo @ 800-786-0004, ext.134 for more financing questions.
Leasing Contact Info:
John Marrazzo
Susquehanna Commercial Finance, Inc.
800-786-0004 x134
800-786-0023 fax
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