You Have Better Things To Do With Your Cash
Concept #1: Use of equipment, not ownership, is what generates profits.
Concept #2: Liquidity is critical to all companies.
- Understanding these two concepts explains why leasing is now the single largest source of financing used by American corporations.
- Oil tycoon J. Paul Getty, the world's first billionaire, coined the phrase "Buy that which appreciates, lease that which depreciates." Today, over 30% of all equipment acquired in the U.S. is acquired under a lease contract. Over 80% of companies - from small start-ups to the Fortune 500 - lease some or all of their equipment with lease originations totaling close to $300 billion annually. Even consumers are joining in, leasing more cars than ever before.
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Alternative Use of Funds
Because paying cash avoids interest expense, it lulls business people into thinking that it is a good way to acquire equipment. But these so-called savings can actually wind up doing more harm than good by keeping companies from investing in other, more profitable areas. - Here are some of the things you can do with cash that you can't do any other way (not including covering payroll and other ever increasing expenses):
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- Be able to accept that large order and pay for the materials to produce it.
- Take advantages of quantity buying opportunities.
- Get a bargain at an auction.
- Take cash discounts (2% a month adds up fast).
- Fund new research and development.
- Expand marketing and advertising efforts.
- Hire more salespeople (including that top pro who works for the competition).
- Buy your biggest competitor (or make other synergistic acquisitions).
- Invest in real estate or other growth assets.
- Take a trip around the world.
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Other Reasons To Lease:
"100% Plus" Financing
Quail leases can cover everything including installation, software and training. -
Better Terms Than Banks
Bank lending agreements often contain restrictive covenants, escalation clauses, "call anytime" provisions, compensating balance requirements, cross collateralization with other assets and the filing of blanket liens; provisions not found in quail leases. -
Obsolescence Protection
With equipment life cycles getting shorter, ownership of equipment is even less important. Quail leases can be structured to allow upgrade to new technology when needed. This prevents getting locked into obsolete technology in a marketplace where "out of date" can mean "out of business." -
Direct Tax Expensing
Qualifying lease payments are written off as made. No depreciation schedules mean lower accounting costs and still more cash for investment. - And there is even a scenario where you can write off the whole investment right away, before you've paid for it. -
Easier Cost Analysis
The simple formula of lease payment less tax percentage divided by number of business days and working hours is all it takes to identify equipment cost and facilitate pricing. No more complicated computations. -
Variable Payments
Quail can match lease payments to project revenues or seasonal cash flow variations to eliminate the need to divert funds to pay for equipment. -
Financial Reporting Advantages
Many Quail leases can be structured to qualify for "off balance sheet" accounting treatment. This improves ratios and avoids lending covenant violations. -
Protecting Bank Lines
Banks are great for short term needs and smart managers keep those lines available, but bank flexibility on equipment transactions is less than optimum. -
Simple and Easy
With Quail, a one page application can get you approved for up to $100,000 of equipment; and the requirements for larger transactions are also "user friendly."
