EQUIPMENT LEASE TYPES

Capital Leases

A capital lease is an equipment lease which represents ownership and is reflected on the company's balance sheet as an asset. A capital lease, in contrast to an operating lease, is treated as a purchase from the standpoint of the person who is leasing and as a loan from the standpoint of the person who is offering the lease, for accounting purposes. A capital lease may also be referred to as a nominal lease. They share the advantage of fixed monthly payments but with the guaranteed option to purchase the equipment for a nominal price at the conclusion of the lease.

$1 Purchase Option

With the $1 purchase option, the entire purchase amount of the equipment is financed. At the end of the lease a $1.00 payment is made and the equipment is yours.

10% Purchase

The 10% purchase option also has the advantage of a lower monthly payment. At the end of the lease, a lump payment is made which is equal to 10% of the original purchase price. Equipment is owned by the lessee after the 10% payment is made at the end of the term. With this type of lease there is no uncertainty about the value of the equipment at the conclusion of the lease as the buyout terms are generally a part of the initial agreement.

True Leases

True leases, commonly referred to as fair market value (FMV) leases, are a great way to stay ahead of rapidly changing technology and allow for upgrading to new equipment as needed. FMV leases also allow you to expense your payments and accelerate depreciation. At the end of a true lease, the lessee typically has the option to purchase the equipment at fair market value or may return the equipment to the lessor.

 

Additional Lease Options

K2 Capital Group can offer a variety of creative financing options that give you the tools you need to succeed. Some of those options include:

First Amendment Lease

The first amendment lease gives the lessee a purchase option at one or more defined points with a requirement that the lessee renew or continue the lease if the purchase option is not exercised. The option price is usually either a fixed price intended to approximate fair market value or is defined as fair market value determined by lessee appraisal and subject to a floor to insure that the lessor's residual position will be covered if the purchase option is exercised.

Deferred Payment

The deferred payment lease gives flexible financing solutions for businesses that need equipment for operation and development that will not immediately generate revenue. Generally, deferred leases allow businesses to acquire the necessary equipment with no down payment and no lease payments for 60 to 90 days.

Sale Leaseback

Sale leasebacks allow a company to unlock the equity in a particular asset (equipment, for example) by converting that equity into cash. It does so by conveying the title of its assets at their fair market value to another institution (usually a financial one) in exchange for a lump-sum payment. The new owner then leases the equipment back to the original owner, availing them to potential balance sheet enhancements and tax benefits.

Purchase Upon Termination (PUT) Lease

Purchase upon termination, commonly referred to as a PUT, is an agreement by the lessee to purchase the property at the end of the lease term for a fixed amount.

Step Up/Down Payments

Generally, new equipment will result in increased revenues over time. Step Up/Down Payments are designed to provide flexibility to the lessee as they try to match lease expenses with expected cash flows. Step-up leases are typically employed in longer-term leases spanning several years into the future.

Cost Per Case Financing

Cost Per Case structures are designed to provide the most flexible form of financing available since it is based on the actually usage of the equipment that is being leased. It allows businesses such as hospitals, surgery centers and other private practices the ability to control cash flow and address reimbursement pressures. It helps healthcare providers match revenues and expenses on a procedural basis. Rent payments are made as income is generated, facilitating positive cash flow and predictable margins. Also, in some cases, payments may be considered operating expenses for tax purposes (please consult your tax advisor for more information).

 

ABOUT US

Headquartered in Minneapolis, K2 Capital Group is a national provider of equipment leasing solutions within a variety of industries. READ MORE

LEASING ADVANTAGES

With the high cost of capital acquisition, leasing can be an attractive option when you consider the numerous benefits it provides. READ MORE

RECENT TRANSACTIONS

In the last eight years, the leasing professional at K2 Capital have financed more than $400 million in equipment. The company currently services nearly $100 million in equipment leases for its own portfolio and for many banks nationwide. READ MORE

RECENT NEWS

K2 Capital recently announced that it has formed a unique leasing partnership with MIB, a bankers' bank headquartered in Jefferson City, MO READ MORE

Terms and Conditions | Privacy Policy | © 2014 K2 Capital Group