Frequently Asked Questions

What is a lease?

A lease is essentially a contract stating that the “Lessor” (Leasing Company) can grant the “Lessee” (the Customer) the rights to use its equipment for a specified period of time for a specified payment. A lease can help the customer finance the possession of the equipment or act as a source of working capital.

The lease contract can be written as a single transaction or as a “master” lease with continuing agreements. The “master” lease agreement will be written with continuing separate schedules that detail the specific equipment. Both contracts will require the lessee to make regular payments to the lessor for the use of the lease equipment.

What is the difference in tax benefits in a Capital versus Operating lease?

The Lessee is considered the owner of the equipment for tax purposes in a Capital Lease. The lessee can claim depreciation on the equipment on its tax returns. For an Operating lease, the lessee is not considered the owner of the equipment for tax purposes. Therefore, it cannot claim depreciation on its tax returns. Although the lessor is the owner of the equipment in an operating lease and, therefore, receives the tax benefits, the Lessee does receive lower rental payments. The Lessee will receive deductions on the total amount of rental payments on its tax statements.

How does “cash flow” affect my decision?

Cash flow is the normal flow or process of cash throughout your business. Increasing your cash flow basically means that your company will reduce the number of payments it makes so that more cash is available. Usually, the fair market value or residual value at the maturity date will be projected so that the rental payments can be reduced accordingly. This greatly increases cash flow and produces significant cash savings.

What is a Sale-Leaseback?

A sale-lease back is where the owner sells the equipment to a leasing company and then immediately leases it back. The asset may be subject to a security interest by another party prior to the sale-leaseback. In this type of transaction, the secured party is usually paid off at the time of the sale and the seller retains ownership at the end of lease term.

How is a Sale-Leaseback beneficial?

A sale-leaseback provides the owner another source of working capital so that the owner will have more cash upfront for other areas of his business rather being tied up in the depreciating assets. This also allows for the use and recognition of significant hidden equity in depreciated assets.

What are the insurance requirements for leased equipment?

Generally, we require $1,000,000 in Automobile liability for equipment driven over the road. We also generally require $1,000,000 in General liability for equipment that has a “workable unit” attached or the equipment itself is used for working rather than being driven over the road. In addition, we require all equipment to have some form of physical damage insurance, such as comprehensive and collision, usually with a maximum deductible of $2,500. We include the maximum deductible amounts and minimum coverage limits in our lease agreement.

Altec Capital Services, LLC
Nationwide Headquarters.

33 Inverness Center Parkway, Suite 200
Birmingham, Alabama
35242 USA

Phone (888) 408-8148
Fax (205) 408-8113

 

The Altec Capital credit application is now online.

It just got a whole lot easier to get the tools you need to finance your business.

Apply Now