Standard Capital - Different Kinds of Equipment Leases
The type of equipment you want to lease, the term, and whether you want to keep the equipment at the end of the term, will all be factors in choosing a lease. Standard Capital can help you to choose the best Lease, Loan, or EFA (equipment finance agreement) for you and your business.
Lessees may lease one piece of equipment at a time or many items with a single lease. Companies that continually acquire equipment may use a master lease to avoid executing a new contract for every acquisition.
Below are common types of leases offered by Standard Capital
Operating Lease: Standard Capital offers operating leases- the term is shorter than the expected useful life of the equipment. Rental payments do not cover the equipment cost for the lessor during the initial lease term. This type of lease is popular for high-tech equipment, because shorter term leases help equipment users stay ahead of equipment obsolescence. The lessor uses its equipment remarketing expertise to subsequently find other users for the returned equipment, something the typical equipment user does not have time or ability to do. Because the payments and leased equipment are treated as operating expenses, this type of lease is often compared to a rental. Unlike a rental, however, operating leases are typically longer in length, ranging from 12 months to 5 years. Operating leases can also be referred to as fair market value (FMV) leases when the option to purchase the equipment at the end of the lease for its fair market value is included. Under this type of contract, the lessee has the right, but not the obligation, to purchase the instrument at its fair market value.
Finance Lease (or Capital Lease): Standard Capital offers Finance or Capital Leases- the term is longer, more nearly covering the useful life of the equipment. Rentals tend to be lower because of the longer term and less residual risk. From an accounting standpoint, an operating lease is the simplest type of lease for you to account for because you only expense rentals; there is no requirement to add the asset to the balance sheet, as long as the footnotes to the financial statements indicate the amount of your firm's lease rental obligations.
1$ Buyout Lease: Standard Capital offers $1 buyout leases most often- this is another type of finance lease companies can opt for. It works in the same way as a capital lease in that a lessee makes monthly payments for a piece of equipment until, at the end of the lease period, they can buy the equipment for a lower price than its fair market value. In this case, the company is guaranteed the option to buy the instrument for $1, thus the name, “$1 buyout lease.” This type of lease makes the most sense when the company is positive that they want to use the equipment long-term and eventually own it. A $1 buyout lease is structured so that the bulk of the equipment’s cost is paid during the lease term, with the final $1 purchase added to the last lease payment automatically solidifying actual ownership. Standard Capital does a large number of $1 buyout leases and EFAs (equipment finance agreement)
Saleback Lease: Standard Capital offers Saleback Lease (SLB) which has a number of different names: sale-leaseback transaction, sale-and-leaseback, or, simply, a leaseback. No matter what the name is, they all refer to the same thing: the sale of a piece of equipment, and then the subsequent leasing back of it to a finance company. It is known for being an effective tool in equipment financing that can positively impact your cash flows, serving many companies in capital-intensive industries well due to the high costs of analytical lab equipment. When you conduct a sale-leaseback transaction or arrangement, you sell the equipment you recently purchased in order to recoup what you paid for the instrument. Then the leasing company or lender (Standard Capital), leases that equipment back to you, allowing you to pay for the instrument over multiple years through flexible lease payments rather than paying for it all up front. Not all equipment will be eligible for this kind of contract- it depends on the type of equipment, the age, value, and condition. Contact Standard Capital today to find out if your equipment is eligible for a leaseback.
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