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Fitness Solutions - Financing
 

Fitness Solutions

Financing

Leasing Information


Preserve your cash flow. With leasing, you need only a minimal initial investment to get the equipment you need and you can comfortably spread your payments out over time. This allows you to preserve your working capital for the operation and growth of your business.

Maintain your credit. Choosing to lease your equipment allows you to keep your available credit line open for operations and short-term financing.

Increase flexibility. Your equipment needs will grow and change along with your business. With equipment leasing, you have the option to take on additional equipment or upgrade the equipment you currently possess.

Tax deductions. Take advantage of the new tax deduction limits for equipment as set out in section 179 of the US tax code. In some cases, as much as 100 % of the equipment cost, up to a specified limit, can be immediately deducted from your taxable income.

Customized financing. With equipment leasing, you can choose from a wide variety of leasing packages and payment plans to create a financing plan that follows the natural flow of your business. Financial Advantages 

Conservation Of (Working) Capital:


With an equipment lease, you get 100% financing so the amount of cash needed up-front is reduced. Even if you have the cash to purchase your equipment it may not always be the best choice. With equipment leasing, cash can be used for other business uses such as expanding sales, new marketing programs, quantity discounts, increasing inventories, opening a new line of business, or simply cash reserves. If you decide not to lease you will have to come up with the entire amount for a cash purchase OR a sizeable down payment as well as higher payments for traditional financing. 

Preservation of Credit Lines:


A lease preserves bank lines of credit for working capital, seasonal requirements, other appreciating investment opportunities, or emergencies. Equipment leasing is like opening an additional line of credit. 

Better Terms and Structure than Banks:


Most bank loans require larger down payments, compensating balances, additional collateral, or restrictive covenants. They may not be as flexible in their payment schedules and may tie the financing to a floating interest rate. Equipment leasing has fixed payments, flexible schedules, low down payment, and does not require extra collateral. 

Off-Balance Sheet Financing:


Larger companies often have a need to maintain certain debt-to-equity ratios or comply with debt covenants. Operating leases do not show on the balance sheet as liabilities and the equipment is not counted as an asset, thereby keeping the ratios unaffected. 

Tax Advantages:


Operating leases are generally treated as fully deductible direct operating expenses, which means a lower taxable income. In addition, equipment leasing can be a tool to avoid certain negative impact of the Alternative Minimum Tax. Your tax professional should be consulted to determine what percentage of other types of leases could be deducted. 

Leasing Provides Sales/Use Tax Deferral:


With a purchase, sales tax must be paid in full at the time of purchase. With (most types of) equipment leasing sales/use tax is paid over time as the equipment is used (except in Illinois, Maine, New Jersey, and the District of Columbia). This can result in substantial cash savings in the first year of the lease. 

Hedge Against Inflation:


With the lower, fixed-rate payments of an equipment lease, you're protected against inflation. With equipment leasing, cash outlays are deferred as compared to an upfront purchase. Inflation will then lessen the cost of future lease payments, since the payments will be made with "cheaper" dollars. You will be making your monthly payments to the leasing company with ever-inflating dollars during the term of the lease. This actually reduces the cost of financing to you in real dollars, which is an advantage that is often overlooked. 

Maintains Owner's Equity:


Many companies in a growth phase sell stock to raise money for expansion. A well-conceived lease program can allow a company to grow while minimizing the need for equity financing. 

Facilitates budgeting:


Equipment leasing simplifies accounting procedures and eliminates depreciation scheduling. A fixed lease cost ensures consistent control over equipment expenditure. 

Lease vs. Loan


Lease Loan
  • Frees Up Capital
  • Hedge Against Inflation
  • 100% Financing
  • Simple Application
  • Potential Tax Advantages
  • Easy Add-ons and Trade-ups
  • Preserves Credit Lines
  • Fixed Payments
  • Longer Terms
  • No or Low Down Payments
  • No Additional Collateral
  • No Closing Fees
  • Reduces Available Credit Lines
  • Extensive Documentation
  • Extensive Monthly Reporting
  • Often Requires Additional Collateral
  • Often Requires a Large Down Payment
  • Not Flexible
  • Negative Impact on Balance Sheet
  • Some Bank Loans can be Cancelled by Lender at any time

Lease vs. Cash


Lease Cash
  • Simple Application
  • Frees Up Capital
  • Hedge Against Inflation
  • 100% Financing
  • Potential Tax Advantages
  • Easy Add-ons and Trade-ups
  • Preserves Credit Lines
  • Fixed Payments
  • No Additional Collateral
  • Ability to Work Within Budget
  • Disregards Time Value of Money
  • Depletes Cash Reserves
  • Negative Impact on Balance Sheet
  • Reduces Cash Asset Position

 

 

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