"Dougherty Equipment Finance LLC finds creative ways to structure lease transactions to fit the needs of its customer banks and equipment users."
Advantages of Leasing
Dougherty Equipment Finance LLC’s leasing and lending solutions are attractive to financial institutions and borrowers/lessees alike because they endeavor to meet the needs of each regardless of their type or size. LOANS are widely understood as a traditional means to finance equipment acquisitions. Here are some of the advantages for both financial institutions and the users of equipment when considering the LEASING alternative:
Financial Institutions Perspective
- Improve Credit and Asset Quality: Most of our lease transactions are with publicly-traded companies that may be more transparent and creditworthy than what can be found in local communities.
- Wider Spreads: Spreads earned can be significantly higher than what can be earned on a comparable creditworthy loan or investment.
- Improve Loan-To-Deposit Ratio: With the lack of good loans today, leasing can provide banks with the ability to put capital to work immediately in an FDIC allowable investment.
- Utilize Tax Capacity: While other bank expenses are managed, why not tax expense? Through the use of the equipment’s non-cash, tax depreciation deductions, financial institutions can reduce and manage their tax obligations to increase earnings and retain more of their cash. In most cases, cash investments in lease transactions can be made in lieu of estimated tax payments.
- Geographical and Economic Diversity: Lease transactions offered by Dougherty can act as a cushion against downturns in the local economy.
Equipment User Lessee Perspective
- Flexibility: The ability to use different lease structures allows for the opportunity to optimize various parameters to meet the needs of the user lessee, such as the number and amount of rent payments, the term, various purchase options, etc.
- Hedge Obsolescence: Leasing helps equipment users (called lessees) avoid the burdens of ownership, one of them being equipment obsolescence. Much of today’s equipment incorporates technology that is rapidly changing. Such equipment may become less attractive to the lessee before the end of its useful life. Should this be the case, the risk of ownership can be shifted at an economic cost to the lessee.
- Budget Constraints: When a company fully utilizes it budgeted amount for capital expenditures, it will be prevented from purchasing any additional necessary equipment. Alternatively, the company could lease the equipment and fund it via lease payments from its operating budget instead of through its capital budget.
- Affordability: Leasing generally requires no down payment, and the incidental costs of acquiring the asset such as sales tax and installation charges can be included as part of the lease payment itself. Furthermore, no additional collateral is necessary to secure the lease financing. In this case, leasing helps a company conserve its working capital for its intended purpose without encumbering its other assets.
- Deductibility of Rental Payments: Lease payments for an operating or true lease are fully deductible for federal income tax purposes.
- Diversification of Financing Sources: Businesses are aware of the danger of depending solely upon its traditional sources of equipment financing. Diversification of financing sources makes good sense whether credit is in short supply or not.