CoatingsPro Magazine

NOV 2014

CoatingsPro offers an in-depth look at coatings based on case studies, successful business operation, new products, industry news, and the safe and profitable use of coatings and equipment.

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28 NOVEMBER 2014 COATINGSPROMAG.COM consideration in choosing between a lease and a loan. A loan provides you with the depreciation tax benefit. With a lease, the lessor owns the equipment and realizes the tax benefit, which is usually reflected in a lower monthly rent payment for your business as well as the ability to expense the payment. In many instances, if your business cannot use the tax benefit, it makes more sense to lease than to purchase through a loan because you can trade the depreciation to the lessor in exchange for better cash flow. 7. How will a working capital facil- ity be impacted? Many businesses have an aggre- gate line of credit through a bank that they can use for inventory purchases, improvements, and other capital expenditures. Depending on the lending covenants, it is often possible, as well as preferable, to preserve your bank working capital by leasing equipment through an equipment finance provider. 8. How f lexible does your business want the financing terms to be? A lease can provide greater flexi- bility, since it can be structured for a variety of contingencies, whereas with a loan, flexibility is subject to the lender's rules. If your business has continuing use for the equipment at lease termination, extended rentals, purchase options, trade-ups, and return options are available. The lease term allows your business to match all expenses to the term of the equipment's use, including income tax expense, book expense, and cash expense. Most importantly, as mentioned previ- ously, the expense stops when the equipment is no longer required. 9. Do you anticipate the need for additional equipment under your financing agreement? If your business is planning for growth, you may be able to enter into a master lease that will allow you to acquire multiple pieces of equipment under multiple sched- ules with the same basic terms and conditions. This provides greater convenience and flexibility than a conditional loan contract, which must be renegotiated for additional equipment acquisitions. 10. Who can help me evaluate what's best for my business? Whether you finance equipment through a lease or loan, each has its advantages and disadvantages. When making the decision between a lease and a loan, it is highly recommended that you consult with your accounting professional, as well as draw on the resources of your equipment financing provider to enable you to secure the best possible terms for your lease and/ or loan. Tese are some of the key consid- erations that should go into the lease versus loan decision-making process. Tis is a particularly good time to fnance equipment because there is so much liquidity in the marketplace. Tere are many funding sources — leasing companies, banks, and some manufacturers — that are looking to lend because they have the cash avail- able to deploy. So, a highly competitive marketplace makes this a favorable time to fnance productive equipment. For a lease/loan comparison and online tools, visit www.equipmentfnancead- vantage.org/ef101/llc.cfm CP William G. Sutton, CAE, is president and CEO of t he Equ ipment Leasing and Finance A ssociat ion (ELFA), t he t rade associat ion t hat represents companies in t he $827 bi l l ion equ ipment f inance sector, which inc ludes f inancia l ser v ices companies and manufact urers engaged in f inancing capita l good s. ELFA has been equ ipping businesses for success for more t han 50 years. For more infor ma- t ion, contact: ELFA , w w w.ELFAon l ine.org There are many funding sources — leasing companies, banks, and some manufacturers — that are looking to lend because they have the cash available to deploy. Notes From The Field

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