Conversion of Capital

When capital (cash) is conserved by financing or leasing equipment, it can be used for other company expenditures (New product development, increased marketing and promotions, sales expansions, etc.).

Conversion of Credit

A rental or lease agreement is not a loan. Borrowing reduces lines of credit. Leasing is thus a new credit source.

Balance Sheet Effect

If structure is purchased and the money borrowed, LIABILITIES are increased; liquidity will be decreased. If structure is purchased outright (by cash), fixed assets are increased, current assets are decreased... less liquidity again.

Impact on Statements

A lease has a direct effect on a balance sheet and current ratio because it is not considered a loan. The entire lease payment is treated as an expense item. However, we suggest you check this item with your own accounting and tax experts.

Avoids Dilution of Ownership Equity

It may be better to lease or rent the structure than to dilute ownership in a company through equity financing to acquire funds.

Simplifying Accounting

Leasing relieves a user of the responsibility to maintain burdensome cost accounting records and eliminates structure and depreciation controls.

No Commitment

Rental provides an inexpensive means to try a new structure without a long-term commitment.

Hedging Against Inflation

Financing and leasing provides for payment over a longer term. Payments are made with tomorrow's dollars which may have less value than today's.

Tax Break

When you lease a structure, you're not obligated to pay property taxes, like you would by owning a permanent building.

Cost

Leasing is generally the lowest cost to use a structure for a designated period of time. Payments are fixed for the term and can include total costs including maintenance.

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