Leasing is a term that can benefit your company when you are undertaking a franchise and have high costs of property and machinery. It helps alleviate some of those repetitive costs.

Leasing is a process that starts with a contractual relation between you and the Equipment Leasing Company by which the latter is bound to lease you equipment for the payment of a fee during a specific period. When this period is over, your company decides whether it wants to purchase the property, renew the contract or return the equipment leased.

When the lessee (meaning your company) decides to buy the equipment from the hands of the Equipment Leasing Company, the latter will sell it at a residual price. This is the difference of all the payments you made to the Equipment Leasing Company and the price they originally paid for the equipment, plus interests and other expenses. If you decide to continue leasing, you would only need to extend the contract. If you leasing is not for you, then you are bound to return the equipment.

Your company can decide between three kinds of leasing options:

One which we will call Financial. In this one, the Equipment Leasing Company buys the equipment for your company to use. However, your company would be responsible for all maintenance and repairing costs related to the equipment. The main attractive of this option is the accelerated depreciation which saves you money in taxes.

Operational Leasing. Here, the Equipment Leasing Company pays for both the equipment and the additional maintenance and repairing cost.

The third one is called Back Leasing. Here your company will sell the equipment to an Equipment Leasing Company which will later lease it back to you in exchange of a fee. However in this option, you have no tax advantages.

What are the costs leasing? The costs come from two sources: depreciation and interest rates. The first one is the most expensive one, and the last on is the cost of having money availability.

Leasing is made more attractive thorough the usage of Granting. This is a method that companies use to increase the residual value of the excess in their inventory to make it greater than their present value in order to pay smaller monthly leasing fees.

The cost of leasing will be the addition of an interest rate plus the depreciation of the equipment, this interest rate is very suitable for companies with little capital, plus the tax advantages your company could have.