Whether you are a business executive looking to invest in new equipment or a vendor seeking financing options for your clients, you can leverage flexible financing through First American to achieve your goals.
What’s your take on equipment leasing? Explore common myths about this financing solution and uncover real benefits of diversifying your funding strategy.
While the majority of U.S. businesses use financing for equipment and software instead of purchasing them outright, many misconceptions still exist. Let’s take a fresh look at leasing by exploring some of these common myths.
Myth 1: We prefer using cash instead of taking on debt through an equipment lease or loan.
Many of the most profitable, cash-flush companies use leasing as a strategic tool to increase liquidity, invest capital in other high-return initiatives, and take advantage of tax benefits.
Myth 2: It’s easier for me to use my existing bank line of credit than equipment financing.
Companies who work with their primary bank for capital projects often explore alternative funding relationships to diversify their funding sources, avoid covenants and fees, and ultimately complement their banking relationship. Leasing is typically less complicated, more predictable, and faster than a commercial banking transaction.
Myth 3: Equipment financing is too expensive.
In the current economic environment, preserving cash by financing your capital equipment allows you to benefit from high-yielding deposit rates—reducing your net cost of borrowing. Investing in a competitively priced money market or CD account while financing your CapEx needs can provide your organization with a net borrowing rate of 3-4%.
Myth 4: It takes too long to get equipment through financing.
While traditional methods of financing can be bogged down with slow approval processes, red tape, and lots of paperwork, modern lenders make the leasing process simple, streamlined, and fast. With straightforward documentation, digital signatures and invoicing, and hands-on project managers, you can get the equipment you need without unnecessary delay.
Myth 5: Only certain types of equipment can be financed.
Leasing is a smart solution for all types of capital expenditures across virtually all industries—from medical equipment and technology, to software and facility upgrades.
Myth 6: Financing only makes sense for large equipment purchases.
Businesses can use leasing for a range of project costs and asset types—whether it is a one-time $100,000 purchase or an ongoing project totaling $30MM+. You can bundle smaller, soft costs into your leases as well, including construction and installation fees, software licensing, and more.
Myth 7: Leasing locks me into a contract and limits my options.
With custom structures, terms, and payment options, leasing gives you the flexibility to design financing agreements that meet your specific and unique business objectives. And unlike traditional bank offerings, leasing allows you to mitigate risk and take advantage of fixed-rate funds without covenants or blanket liens.
Myth 8: I won’t receive the tax or accounting treatment I need with leasing.
Depending on the type of equipment, length of its use, and other factors, many lease structures can satisfy the tax or accounting treatment that is most appropriate for your business. Whether you want to deduct rental payments or realize the benefits of ownership, leasing can be tailored to fit your objectives.
Myth 9: Returning leased equipment is a hassle.
Leading equipment finance companies offer end-of-lease management services that make returning equipment easy, quick, and secure. These often include convenient features such as pack and ship services (remote or onsite), nationwide return locations, data sanitization, value recovery, and more.
Myth 10: I purchased equipment with cash, so it’s too late to consider leasing.
Fixed assets and software purchases made over the last 12 months can be reimbursed for up to 100% of the original purchase price, enabling you to remain nimble and reinvest the cash in your business.
