Sun South Equipment Leasing, Inc., Advantages of Leasing

	call 863-583-3000 fax 863-583-3100 Pete@SunSouthLease.com
	Wednesday December 3, 2008

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National Association of
Equipment Lease Brokers

Boys and Girls Club
of Lakeland

Advantages of Leasing

see chart below

Leasing allows companies to better match their capital equipment needs with structures and payments that more closely conform to asset life. It can be considered a form of long-term debt used to fund capital expenditures. Leasing is similar to a long-term rental agreement where we (lessor) give you (lessee) the right to use the asset for a fixed period of time, in exchange for an agreed series of payments. At the end of the lease term, depending on the initial legal structure, you may have the right to buy the asset or simply return it to us. Currently, leasing accounts for approximately one-third of all capital expenditures in the United States. Approximately 80% of all U.S. companies use some form of leasing to finance their capital expenditures.

Flexible Capital

A lease can be structured as either a fixed rate or floating rate obligation customized to meet your specific needs. Industries from transportation, to aviation, to mining and construction, diversified manufacturing, and telecommunications can benefit from the flexible financing leasing offers. Lessees vary widely from middle market companies to large, multi-national corporations. The types of equipment being lease are just as diverse as the users.

As you place a higher value on your working capital and need for liquidity, leasing should become an integral component of your capital structure. Through various structuring techniques, you can achieve 100% financing, secure long-term rates, and attain cash flow benefits thereby increasing your existing capital.

Advantages of Leasing

Maximizes retained capital in your business by financing up to 100% of your needed assets
At the end of the lease term, you may have a choice to purchase the asset, renew the lease, or walk away
Lease term is typically tied to the assumed useful life of the individual asset
Leasing can be a reliable financing tool for lessees in an Alternative Minimum Tax position
Leasing can be structured to provide either fixed or floating rate financing
Certain lease structures can achieve off-balance sheet accounting treatment

Equipment Leasing vs Bank Financing

	Equipment Leasing	Bank Financing
Interest Rate	Fixed rates / fixed payments	Usually an adjustable rate
Terms	Up to 5 years	Usually 2 - 3 years.
Down Payment	0 - 5% (1st and last payment)	Typically 10 - 30%
Financial Statement	Not mandatory for most transactions up to $50,000 and financials are not required annually after that.	Required on almost all transactions over $10,000 and banks usually require annual updates to maintain loan.
Sales Tax	Part of monthly payment	Must be paid in advance
Hidden Requirements	None. Application fee only on completed transactions.	Compensating balances, other bank charges, loan covenants.
Tax Benefits	Usually 100% deductible over the term of the lease (makes effective rate lower)	Depreciated over the IRS's useful life of the equipment. Principal is not deductible.
Effective Cost	Possibly lower than bank financing due to tax benefits, lower down payment, longer lease term, and no requirements for compensating balances.	Higher cost due to longer depreciation schedule, larger down payment, adjustable interest rate, and other hidden costs.
Opportunity Cost	Preserves bank lines and cash, for operating expenses such as salaries, advertising, etc.	Depletes bank lines, possibly preventing opportunities to expand your business.
Risk	Pledges only leased equipment.	May require assets, home or other assets as collateral.
Quick Response	Yes	No
Deferred Payments	Yes	No

* Please consult your accountant or professional tax advisor for the best solution for your business.