• 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.)
• Conservation of Credit - A Rental or Lease Agreement is not a loan. Borrowing reduces lines of credit. Leasing is thus a NEW credit source! With "Tight Money," THIS IS IMPORTANT.
• 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.
• Simplify 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.
• 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.