How common is equipment lease financing in today’s market?
Equipment leasing is a major means that companies and municipalities of all types and sizes employ to acquire equipment. The current economic landscape has CFOs looking for creative ways to fund equipment acquisitions and manage capital budgets. A renewed focus is being squarely placed on working capital and increased liquidity. This sensitivity to capital value tends to enhance leasing as an alternative to traditional debt financing. Companies lease for many reasons, but seldom exclusively, to avoid the capitalization of new equipment. The most common reasons for leasing are to match cash flow to productive use of assets, to avoid technological obsolescence (return and upgrade), for 100 percent loan to value financing, for efficient use of tax incentives for acquiring new equipment, to improve cash flow benefits and to expand available credit. How does a company’s tax status affect the decision to lease or buy? A company should look at its current and future tax situation to determine
