If you are looking to purchase farm equipment, irrigation equipment, grain bin facilities or machine sheds and shops, we're here with a variety of lending and leasing options and an expert staff to help you every step of the way. Legence Bank will work with you to customize your farm lease to fit your needs. We are committed to agriculture and we understand the value of quality products and services.
Let us help you finance the equipment you need to help your farm continue to grow and prosper.
- Customizable to fit your needs
- Locally-based staff with working knowledge of the agricultural industry
- Local decision-making and processing
- Value added services to make your life easier
Q. Why Should I Lease Equipment Instead of Buy?
There are many reasons why leasing should be a consideration when purchasing equipment, upgrading technology, or buying vehicles. No matter what business you are in, you may have different cash flow patterns, irregular streams of income, or the need to keep lines of credit open. Leasing provides you with an option to purchase what you need, when you need it.
Companies that are long-established might have other needs, such as: to keep debt lines free, to comply with debt covenants, and to avoid committing to equipment that may quickly become obsolete. Therefore, your business conditions - cash flow, specific equipment needs, and tax situation - may help define the terms of your lease.
A lease provides the use of equipment for specific periods of time at fixed rental payments. Therefore, leasing allows you to be more flexible in the management of your equipment.
Leasing is cost effective.
There is just no other way to say it – equipment is expensive.
When you choose to lease, upgrading obsolete equipment and upgrading to the newest technology available is efficient and painless.
Leasing has possible tax advantages.
Please check with your accountant to find out more. Rather than deal with depreciation schedules and Alternative Minimum Tax (AMT) problems, you, the lessee, maybe able to simply make the lease payment and deduct it as a business expense. Leasing helps conserve your operating capital.
Leasing keeps your lines of credit open.
Your money is not tied up in equity and you avoid the costly down payments. Your balance sheet is also easily managed with off-balance sheet financing.
Q. Who Leases?
Small business to large corporations, farmers, cities, and schools – leasing is a great option for a variety of businesses and the types of equipment leased can be just as diverse.
Whether you are interested in purchasing a few thousand dollars' worth of equipment in computers or multi-million dollar grain bins, tractors, telecommunications systems, medical equipment (including CAT scanners and MRI imaging), office systems, fire trucks, playground equipment, commercial aircraft, and transportation fleets, leasing is an excellent option.
Q. How do I determine what type of lease is best for my company?
As a method of acquiring equipment, you'll find leasing fairly straightforward: It amounts to a rental agreement that is structured to meet your company's special needs. As the lessee, you and the lessor consider the following factors to determine the most effective type of lease for your company.
A finance lease, the term is longer, more nearly covering the useful life of the equipment rentals tend to be lower because of the longer term and less residual value risk.
From an accounting standpoint, an operating lease is the simplest type of lease for you to account for because you only expense rentals; there is no requirement to add the asset to the balance sheet, as long as the footnotes to the financial statements indicate the amount of your lease rental obligations.
Another lease product you may find beneficial is the sale-leaseback: You purchase the equipment you need and use it for a period of time before selling it to a lessor. After selling the equipment, you then lease the equipment. This is another way to free up your operating capital.
On smaller equipment leases worth thousands of dollars, leases tend to be more standardized. Above that cost range - several hundred thousand into the millions - variations appear more frequently. A leveraged lease on a big-ticket acquisition such as an airplane may include several customized provisions and options that would not appear in a typical lease for a smaller amount. Therefore, flexibility is a product of the size of the lease.
These factors include: how long you want to use the equipment; what you intend to do with the equipment at the end of your lease; your tax situation; your cash flow; and your company's specific needs as they relate to future growth. Further, your needs will also determine what happens at the end of the lease. As a lessee, your options include: returning the equipment to the lessor; purchasing the equipment at fair market value or a nominal fixed price; or renewing your lease. As the lessee, you should understand what your options are and discuss them with your lessor.
Q. How Does Leasing Work?
Almost any type of equipment can be leased. As the lessee, you deal with the lessor concerning the term of the lease and the rate.
There are three ways you can acquire equipment through leasing:
- You can select and order the equipment and then seek financing through a lessor
- You can select the equipment by working with a vendor or a manufacturer, which offers leasing through its own subsidiary
- You can obtain the equipment directly through a lessor
In most cases, the lessee selects and orders the equipment before contacting the lessor. Unless provided for in the provisions of the lease, lessors don't normally provide equipment warranties. Equipment warranties are between the lessee and the manufacturer.
By signing the lease, the lessee assigns its purchase rights to the lessor, who already owns or who then buys the equipment as specified by the lessee. When the equipment is delivered, the lessee formally accepts it and makes sure it meets all specifications. The lessor pays for the equipment, and the lease takes effect.
Q. How can leasing help my financial picture?
You may ask, "Why should I lease equipment rather than take a bank loan?" For one thing, leasing allows you to keep your bank lines of credit open. In addition, since leasing companies assume there will be a residual value in the equipment at the end of the lease, they can offer lower rental payments, equaling a cash savings to you.
Finally, some types of term debt can interfere with your company's future financial structure; this does not occur with leasing. The Financial Accounting Standards Board (FASB) considers lease rental payments as an expense, not a debt, under many lease agreements. A key advantage of leasing is that it permits 100 percent financing, and the term of the lease can be matched with the useful life of the equipment.
Therefore, if cash flow is a problem, leasing can help your company avoid down payments and keep scheduled payments low by stretching out repayment terms. Moreover, as your business grows, bank lines of credit and your own cash are still available to support increases in your company's working capital requirements.
If you would like more information Legence Bank's leasing program, please call, email, or make an appointment. At Legence, we are "friends you can bank on" and we are excited to help you grow your business.
For more information on Legence Leasing, please contact:
Senior Credit Analyst
Legence Bank and
American Farm Mortgage Company, Inc.
a subsidiary of Legence Bank
Commercial Loan Officer
Vice President of Guaranteed Lending