Equipment leasing is a way for businesses to acquire the tools they need while preserving cash flow. Let’s explore some of the top leasing options available to help you choose the right fit for your company's goals.

1. Capital Lease

A capital lease, also known as a finance lease, is structured for companies intending to own the equipment after the lease term ends. With this option, the equipment is recorded as an asset on your balance sheet, and you gain ownership for a nominal fee (such as $1) at the end of the lease.

Pros:

• Builds equity in the equipment over time.

• Offers tax benefits like depreciation and interest deductions.

• Suitable for long-term equipment needs.

Cons:

• Higher monthly payments compared to other lease types.

• Committed to purchasing the equipment, even if needs change.

2. Operating Lease

An operating lease is ideal for businesses needing equipment temporarily or preferring not to take on ownership. At the end of the lease, you can return the equipment, renew the lease, or upgrade to newer models.

Pros:

• Lower monthly payments than capital leases.

• Payments are considered operating expenses, not liabilities.

• No risk of owning depreciating assets.

Cons:

• No equity is built in the equipment.

• May cost more in the long run compared to purchasing outright.

• Limited to the agreed lease term unless renewed.

3. Sale-Leaseback

A sale-leaseback allows you to sell equipment you already own to a leasing company and lease it back. This approach is a popular choice for companies needing to free up cash for other investments while retaining access to essential equipment.

Pros:

• Provides immediate cash flow.

• Retains use of equipment without interruption.

• Converts existing assets into working capital.

Cons:

• Total cost of leasing may exceed the value of the equipment.

• Requires owning valuable equipment to start.

• May involve strict lease terms or conditions.

4. Fair Market Value (FMV) Lease

An FMV lease is a popular type of operating lease that offers the option to purchase equipment at its fair market value, renew the lease, or return the equipment at the end of the term. It’s especially suited for businesses in industries where technology evolves rapidly.

Pros:

• Low upfront costs and lower monthly payments.

• Access to the latest technology with minimal financial commitment.

• Avoids risks associated with owning outdated equipment.

Cons:

• Fair market value at the end may be unpredictable.

• Higher overall costs if you decide to purchase the equipment.

5. $1 Buyout Lease

This specific type of capital lease guarantees ownership of the equipment at the end of the lease term for just $1. Payments are typically higher than FMV leases, but it’s an excellent choice for companies planning long-term use.

Pros:

• Predictable payments make budgeting simple.

• Guaranteed ownership at the lease's end.

• Builds equity in equipment over time.

Cons:

• Less flexibility if your equipment needs change.

• Upfront commitment to eventual ownership.

Master Lease Agreements

If your business plans to acquire multiple pieces of equipment over time, a master lease agreement can offer simplicity and scalability. This type of agreement allows companies to add equipment under the same terms without renegotiating or signing new agreements for each item.

Choosing the Right Option for Your Business

Deciding on the right lease depends on your company’s unique needs, growth objectives, and financial strategy. At Avtech Capital, we guide businesses through the complexities of equipment leasing with customized solutions designed to simplify the process from start to finish.

Contact us today to discuss your equipment needs in-depth.