The interest rate can be either fixed or variable and can be locked through a specified time period or float with a market index until actual commencement.
Additionally, the monthly payment or repayment term can be variable.
Structured from three to seven years with tax benefits of ownership for account of lessee.
Purchase options may vary from $1.00 to 20%.
Traditional: Structured from three to ten years with tax benefits for account of lessor. Purchase option price is fair market value (FMV) at lease termination.
Synthetics and Hybrids: Similar to traditional leases with the addition of either a predetermined early buyout option (EBO) or a maximum dollar limit or percent of original cost instead of fair market value.
Sale and Leaseback
This can allow a company to convert depreciated equipment into working capital for future growth.
Both leases and loans can be structured as operating or capitalized obligations consistent with the FASB 13 guidelines for balance sheet accounting.
Financing commitments are typically negotiated prior to equipment delivery and acceptance.