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Frequently Asked Questions

 

What is the process for leasing equipment?

AmeriTel reviews the credit information supplied on the lease application. Upon approval, the lease agreement is prepared and sent to the lessee. When the equipment is delivered, AmeriTel pays the dealer and begins billing the lessee for the agreed upon lease payments.

 

Who owns the leased equipment?

AmeriTel Financial Services, Inc., as the lessor, is the owner.

 

Who can lease?

Any company, organization, municipality or association can lease equipment. AmeriTel cannot lease equipment to an individual for personal use.

 

How are lease payments determined?

The monthly payments are based on the term of the lease, cost of the equipment, and the type of leasing plan the lessee chooses. The initial term of a lease runs from 12 to 60 months.

 

What factors are used to determine credit worthiness?

Type of business, length of time in business, financial condition, references from financial institutions, and D&B (Dun & Bradstreet) &/or other credit bureau ratings.

 

Who services or maintains the equipment?

The lessee is responsible for maintenance and receives the benefits of all "buyer" warranties.

 

Can the lease be cancelled?

Usually no, but the equipment can be traded-in for new equipment before the expiration of the initial lease’s term. The lease can be paid off early without penalty.

 

Is a down payment required?

A security deposit, usually equal to one or two month’s lease payments, is generally needed. This differs from a down payment in that the amount is typically much smaller and it is a true deposit which can be applied to the purchase price of the equipment at lease end, or returned if there are no other payments due.

 

Can the equipment be purchased at the end of the lease?

Yes! The lessee has the option of continuing to lease, purchasing the equipment, or returning it to AmeriTel. At lease-end, AmeriTel will also offer to finance the purchase price of the equipment for the lessee’s

convenience.

 

Why lease?

There are a number of advantages that make leasing an attractive option for many firms. These include the fact that leasing offers fixed regular payments, provides financing for 100% of the equipment cost, allows businesses to pay for equipment as it is used to generate income, conserves both working capital and lines of bank credit, and it can offer certain tax advantages as well.

 

What about sales and use tax?

AmeriTel will invoice the lessee for the appropriate tax.

 

What about insurance?

For the protection of both AmeriTel, as owner of the equipment, and our lessees, who need the equipment for their business operations, we require that the equipment be insured. The lessee’s current insurance company can provide insurance.

 

Who should sign the lease?

The lease should be signed by an authorized officer of the corporation, by one of the partners of a partnership, or by the owner of a sole proprietorship.

 

From a tax perspective, how does the lessee account for the lease?

The lessee’s accountant should determine the best tax treatment for his client. 

 

What Types of Companies Lease?

Lessees vary widely from small, one-person operations to Fortune 100 corporations, and the kinds of equipment being leased are just as diverse. Its not surprising that 8 out of 10 U.S. businesses use lease financing to acquire needed capital equipment. Over 65% of Fortune 1000 companies lease. Small businesses use leasing as a smart equipment acquisition alternative - one that helps them preserve valuable working capital needed for further growth. Whatever their market or size, as companies continue to face increasing competitive pressures, their need for a variety of financial services grows. Innovative, customizable leasing arrangements are an important part of this mix

 

What factors should I consider?

A lease is a financing agreement that is structured to meet your organization's special needs. To decide if leasing is the best option in your case, you should ask yourself these questions:

  • What is the most efficient use of your cash flow?

  • How long will you use it?

  • What will your equipment needs be in the future?

  • What do you intend to do with the equipment at the end of the lease.

  • Your tax situation.

  • The uses of your bank line of credit

Obviously, you will want to factor the cost of leasing into your evaluation. Generally, the cost of leasing is comparable to those of other financing options when looking at the whole transaction. Lease costs are figured differently from those of loans.  Many leases take into account that the equipment is worth something at the end of the lease term. This is called its residual. Residuals are built into lease pricing, usually making the lease payments lower than a loan. To compare lease products, it is better to compare monthly payments than to try to compare loan interest rates with lease rates. On a cost-of-capital basis, leasing may be the least expensive option.

You also will need to determine what happens at the end of the lease. Your options can include returning the equipment to the lessor, purchasing the equipment at fair market value or a nominal fixed price, or renewing your lease.

No matter how the transaction is structured, leasing is a way of maximizing financial efficiency for both dealers and their customers. Our leasing programs are structured to help manufacturers; distributors and dealers offer their customers low monthly payments, simple financing documents, flexible credit terms, and one-stop shopping.

What are the Differences Between a Lease and a Loan?

Loan

Lease

A loan requires the end user to invest a down payment in the equipment. The loan finances the remaining amount.

A lease requires no down payment and finances only the value of the equipment expected to be depleted during the lease term. The lessee usually has an option to buy the equipment for its remaining value at the end of the lease.

A loan usually requires the borrower to pledge other assets for collateral.

The leased equipment itself is usually all that is needed to secure a lease transaction.

A loan usually requires two expenditures during the first payment period; a down payment at the beginning and a loan payment at the end.

A lease requires only a lease payment at the beginning of the first payment period which is usually much lower than the down payment.

The end user bears all the risk of equipment devaluation because of new technology.

The end user transfers all risk of obsolescence to the lessors as there is no obligation to own equipment at the end of the lease.

End users may claim a tax deduction for a portion of the loan payment as interest and for depreciation, which is tied to IRS depreciation schedules.

When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. The equipment write-off is tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year. The deduction is also the same every year, which simplifies budgeting (equipment financed with a conditional sale lease is treated the same as owned equipment.)

Financial Accounting Standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet.

Leased assets are expensed when the lease is an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios.

A larger portion of the financial obligation is paid in today's more expensive dollars.

More of the cash flow, especially the option to purchase the equipment, occurs later in the lease term when inflation makes dollars cheaper.

 

 

 
 

 
AmeriTel Financial Services, Inc.
6755 Jimmy Carter Blvd. | Norcross, GA 30071 | (800) 788-7368 | Fax: (800) 780-7368