Understanding Lease Options

Most businesses will need to acquire equipment at some point. Whether it’s for their own use, or to use as a tool to meet customers’ needs, it can become a financial burden. Because of this, many will look to leases to fund the purchase.
 
Terminology, tax treatment, and ultimately choosing the best solution for each scenario can be like learning a foreign language for many of us. New equipment and technology can be expensive and can put strains on any business' cash operations. Leasing can provide relief while allowing access to equipment to serve customers, grow business, and reserve cash.

M1 Financial understands the concerns regarding leasing and has broken down our two most common leases available to provide some insight and to help make an informed decision.  

Important terms 

• Fair Market Value (FMV): The price for an asset (equipment, property, etc.) when sold from a willing and educated buyer and seller.  
• Buyout: The price that the lessor will charge to transfer ownership to the lessee.
• Fixed term: The lease agreement is valid until a specific date.

Common Leases Available

• Capital Lease Structures: The point of this program is simply to finance the equipment over several months when cash is not available for immediate purchase
  • The customer commits to a fixed term of payments. At the end of the term, the customer owns the equipment with a $1 buyout. 
  • This structure allows you to reserve capital and pay for the equipment via a stream of fixed amount payments for the agreement term.
  • Requirements:
    • Fixed term (usually 12-60 months) 
    • Lease document/customer PO 
    • Utilizes the facility’s capital budget 
    • Tax treatment 
    • Advantage via IRS-179  

• Operating Lease (aka FMV Lease): This option provides a stream of fixed payment for a specified term and is generally used when concerned about technology obsolescence or capital budgets are not available. 
  • The customer agrees to make monthly payments for a specified term.
  • At the end of this term, the equipment can be purchased at its fair market value, rented for an additional 12 months, or returned to the M1Financial with no further obligations.
  • Requirements:
    • Fixed term (usually 12-60 months) 
    • Lease document/customer PO
    • Utilized the facility’s operating budget
    • End of Term options
    • Buy equipment at Fair Market Value
    • Continue renting or return equipment

Benefits of Leasing

• Access Essential Equipment: Obtain the equipment you need without paying the entire cost upfront.
• Maintain Cash Flow: Keep your cash flow and working capital intact.
• Tax Advantages: Benefit from tax incentives, including the IRS-179 tax deduction.
• Modernize Technology: Stay current with the latest equipment and technology to boost efficiency and productivity. 
• Business Expansion: Grow your business by acquiring equipment that might otherwise be out of reach. 
• Versatile Payment Options: Enjoy flexible payment plans, such as customized repayment schedules or lease-to-own agreements. 
• Inflation Protection: Guard against inflation, as your financing payments remain fixed even if equipment prices increase over time.

Additional Benefits of Working with M1 Financial

• Minimal Paperwork: Enjoy a hassle-free experience with M1 Financial’s transparent lease agreements, free from hidden charges. Our straightforward and honest process ensures swift and trouble-free lease arrangements. 
• Financing Partner: At M1 Financial, we focus on building meaningful relationships. Your dedicated account manager will simplify the process and maintain consistent communication throughout. 
• Fast Turnaround: Recognizing the need for efficiency, M1 Financial offers quick credit approvals with flexible pricing. Expect prompt and unmatched responsiveness from us.
• Flexible Pricing: Understanding that budgets vary, we provide flexible programs with competitive interest rates and terms ranging from 12 to 60 months (1 - 5 years), with the option to delay the first payment. 

Every business is different, which is why it is important to find the best leasing option for your goals. M1 Financial is dedicated to helping you find equipment finance solutions that best meets your needs. 
 
Contact M1 Financial to discuss the best option for you.