Types of Leases:

True Lease

Does not call for full payout of the equipment cost and financing charges during the original lease term. Typically, Lessees receive either no option or, at most, an FMV (Fair Market Value) option to purchase the equipment. True Leases are designed to meet IRS tax guideline definitions of lease and may offer the fastest way to write off the use of new equipment. Under a true lease the lessor is the legal owner of the equipment. This type of lease intends to provide only equipment usage, and does not include predetermined purchase option prices. Lessee's often classify true lease payments as operating expenses, thereby gaining all available tax benefits. A true lease also gives you lower monthly payments than a finance lease.

Finance Lease

This type of lease generally calls for the full payout of the total equipment cost and financing charges over the original lease term. These leases ordinarily include a fixed purchase option (Example: $1 buyout or a fixed percentage of the equipment cost.).

Operating Lease

This type of lease can be designed to meet accounting standards for off-balance sheet financing according to FASB (Financial Accounting Standards Board). Some True Leases are known as Operating Leases because the lessee can classify the lease payments as operating expenses on their " income statement". An operating lease is generally short-term, usually three years or less.

Sale/Leaseback

With this type of lease, businesses can sometimes raise capital by the lessor purchasing the leased equipment from the lessee and then leasing the same equipment back. Sale/Leasebacks may not be attractive to some lessors, because the prospective lessee's purpose often is to raise capital by refinancing owned assets. It's important for businesses to have a valid, productive, reason for a Sale/Leaseback.

Skip Payment Lease

A skip payment lease has a repayment schedule that includes months where no payment is made and no penalties are assessed. Organizations that need a flexible repayment schedule such as seasonal businesses are ideal candidates for this type of lease.

Step Lease (Up or Down)

Some step leases call for lower payments early in the lease term and higher payments later on. Step down leases call for higher payments early in lease term and lower payments later on. The step down lease can permit a faster write-off of leased equipment that will be obsolete in a short period of time.

Deferred Lease (60 or 90 Day)

This type of lease can be structured as a finance lease or true lease. With this type of lease program you'll have 30, 60, or 90 days to use the equipment before your first payment is due. Usually one advance payment is required.

ML Financial Services, Inc.
301 Crawford Blvd. Suite 100, Boca Raton, FL 33432
Ph: (561) 367-7749 Fax: (561) 367-9855 Toll Free: 1-888-296-3322