Why Lease?  

You're Not Alone
Leasing is enormously popular as an equipment acquisition strategy. In fact, almost one third of all equipment acquired in the U.S. each year is acquired on a lease contract. That is well over $200 Billion. Furthermore, about 80% of all companies (including almost all of the largest ones) lease some, or all, of their equipment. This has made leasing the largest single source of external corporate finance in America.

The popularity of leasing stems from such factors as favorable financial reporting rules, the ability to expense payments for tax purposes, the ever increasing pace of technological obsolescence and leasing's effectiveness in improving return on investment and other financial ratios. Most types of equipment – new and used – can be leased

Here are some of the reasons why companies lease more and more equipment:

Preserve Working Capital
Leasing your equipment conserves your working capital for use where it will produce the best return. This could mean more money for R & D, Marketing and Inventory – or for investment in appreciating assets such as real estate.

Budget Considerations
Low payments on an lease can make it possible to fit your equipment investment into the tightest budget constraints and can make the difference between being able to get the equipment you need now – or waiting years.

A lease can cover soft costs such as installation, freight and extended warranties in addition top the equipment itself. These soft costs are not usually covered by other types of financing.

Cost Control
Leases can incorporate easy to budget fixed monthly payments. Fluctuations in the prime rate and other economic fluctuations can not alter your costs over the term of the lease. Payments can be adjusted to specific cash flow considerations such as seasonal fluctuations, the need for ramp up time on new systems and trade up considerations to protect against obsolescence.

Credit Line Maintenance
A lease does not impact your available credit line funds. It is like getting an additional line of credit. Also, in many instances, the lease can be structured as an off balance sheet transaction and thus not considered a liability for financial reporting purposes. This is important if your bank covenants mandate maintenance of certain financial ratios.

End of Lease Options
We can structure your lease to include your preferred end of lease option. You can purchase the equipment at the "fair market value" or for a predetermined amount as low as one dollar. You can also return the equipment or use it as a trade in to upgrade to newer and more sophisticated equipment.

Tax Advantages
Qualifying payments on a lease are 100% deductible as an expense as opposed to only being able to deduct depreciation and interest expense, so your cost recovery is faster. In addition, certain tax law provisions may make it possible for you to expense the entire cost of the equipment now, even though you are paying for the equipment over time.

Tax Code Section 179
Ways To Reduce Your Tax Liability…With Leasing Take A $134,000 Deduction!

I.R.S. Section 179
Business owners who acquire equipment for their business: machinery, computers, and other tangible goods, usually prefer to deduct the cost in a single tax year, rather than in smaller amounts spread over a number of years. This type of deduction is known by its in the tax code number, as a "Section 179″ deduction.

Under Section 179, businesses that spend less than $530,000 a year on qualified equipment, may write-off (up to) $134,000 in 2010. The rules are designed for small companies, so the $134,000 deduction phases out when a business purchases more than $530,000 in one year. Note that companies cannot write off more than their taxable income.

The benefit of a capital lease (a non-tax lease) is that it can take advantage of Section 179: expensing up to $134,000 if the equipment is put in use (installed) prior to December 31, 2010. Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease. Businesses may also depreciate any excess on the under the IRS depreciation schedule for that asset class.

Tax Code Section Expense Detail
The election, which is made on IRS Form 4562, is for the tax year the property was placed in service or an amended return filed within the time prescribed by law. Section 179 property is property that you acquire by purchase (or capital lease) for use in the active conduct of your business. To ensure property qualifies, reference IRS Publication 946.

This expense deduction is provided for taxpayers (other than estates, trusts or certain non-corporate lessors) who elect to treat the cost of qualifying property as an expense rather than a capital expenditure. Under Section 179, equipment purchases, up to the amount approved for a given year, can be expensed (deducted from taxable income) if installed by December 31st. Any excess above the expensed amount can be depreciated depending on the equipment type. Not all states follow federal law. Contact your tax advisor for the specific impact to your business or visit www.irs.gov.

100% Tax Deductible Payments
Fair Market Value Leases
The key component of a FMV lease is that the lessee has the option to return the equipment at the conclusion of the lease–without further obligation. The lessee may also have the option to purchase the equipment for its "fair market value" or to continue leasing the equipment from the lessor. Technically, the lessee does not own the equipment–it is akin to a rental. The lessee does not record the equipment as an asset on its balance sheet, nor does the lessee record a long term liability. The lease is generally treated as an off-balance sheet, "operating expense" and hence, it is 100% TAX DEDUCTIBLE.

Accelerate Your Depreciation
Lower Your Tax Liability
With a cash, bank loan or finance type lease purchase you normally recapture some of your cash expenses by claiming depreciation on the equipment according to the IRS accepted "useful life" of that equipment. You may also claim the interest portion as an expense during the term of any repayment. Depreciation, however, can be spread over 5-7 years on long-lived equipment. The same equipment on an FMV lease can (effectively) be 100% expensed during whatever lease term you select for the lease. For example: you enter into a 36 month FMV lease on equipment that would otherwise have to be depreciated over say, 5 years and you will effectively have written off all of its value (less residual) in just 3 years, instead of 5!

Avoiding the AMT "Double Tax Whammy"
The Lease Strategy
Under the Tax Reform Act of 1986 Congress took aim at small to medium sized businesses that had been reducing their overall tax liability by claiming depreciation on equipment they had acquired. Although the subject is rather complex, the net effect is that companies who have used equipment depreciation to significantly lower their tax liability are subject to a review that may have the effect of classifying some of those depreciation write-offs as "tax preferences" and subjecting those same companies to an additional "Alternative Minimum Tax," in addition to the taxes they would otherwise owe. Owning or purchasing too much equipment, while lowering the traditional tax component, can now trigger the addition of new added taxes. The good news: equipment lease payments that are treated as rentals (real FMV) do not qualify as tax preference items and have no adverse effect on AMT liability. * NOTE: PacWest Scale does not offer tax advice. Always consult a CPA for accounting guidance of these and other tax matters.

Equipment Cost Example: $300,000

1st Year Write Off: ($134,000)
(Maximum Section 179 write-off in 2009)

Normal 1st Year Depreciation: ($33,200)
$300,000 – $134,000 (Sect 179 dedcuct) = $166,000
5 year straight line depreciation on bal = $166,000 x 20% = $33,200)

Total 1st Year Deduction: ($167,200)

Tax Savings Assuming Rate of 35%: ($58,520)
(167,200 x 35% = $58,520)

1st Year Net Cost after Tax Savings: $253
($300,000 – $ TOTAL SAVINGS of $46,480 = $241.480 Net Cost

Lease Products
Financial Products

We can provide a broad range of cost effective and flexible lease products to its customers. Each has specific advantages. Let an PacWest Scale professional help you determine which is right for you.

Express Lease – "App Only" To $75,000
No Detailed Financial Disclosure – one page application only

Credit Approval In 24 Hours Or Less
Signed Lease Application Required But No Financial Statements
Up To $250,000 For Hard Assets With Comparable Credit
Term Length – 24 To 60 Months
Payment Types – Monthly, Quarterly Or Seasonal

Flexible Lease – Wide Variety of Payment Schedules
We can finance new, used and refurbished equipment. We can also include soft costs such as installation, freight, and taxes in the financed amount.
Lease Plans For Start-Up Companies
Term Length – 24 To 60 Month
Deferred Payment Plans (No Payment For 90 Days)
Monthly, Quarterly or Seasonal Payment Plans
Step & Skip Payment Plans
Soft Collateral Leases (Software Only, Fixtures, etc.)

Commercial Lease – Lower Rates, Full financial Disclosure
Low Fixed Rates
Lines Of Credit Available Up To $5,000,000
Structures – Operating Lease, Refinance, Sale/Lease Back Off Balance Sheet Financing, Software Financing, Master Lease Lines, Challenged Credit Program
3 To 4 Day Credit Approvals With Complete Financial Package
Trac-Leases For Business Vehicles. (0% To 35% Residuals)

Investment Grade Lease – Superior Rates & Terms
Up To $50,000,000
Incremental Takedowns
Emerging Markets Considered
Superior Rates For Superior Credits