Business lease

[DTS]

Client called today and wanted to know if I have heard of a business lease. "NO".

They "lease" money to your business instead of a loan. Anyone heard of this and how does it work and affect the return?

I think I need to get out more!!!

Dennis

[S T]

Another form of loan for purchases

Dennis,

Aren't they referring to a business lease for the acquistion of business vehicles or equipment?

See the bank of america link http://www.bankofamerica.com/small_b...overview_lease

Sandy

[DTS]

Yes

Sandy,

Thank you for the site.

I just called the client and he did tell me it is for auto and equipment. However, in an earlier call, he really lead me to believe this was for operating capital and he still is hedging he would like to use a "portion" of this for that.

I told him to call me in the morning after he calls the company, so I should have a clearer answer then.

Dennis

[jimmcg]

Lease?

Ask your client to fax or email you a copy of the tentative (or final) lease agreement. Then you can review it and determine for yourself exactly what they are talking about. I learned a long time ago to tell the client I want to review the documentation rather than listen to the verbiage which is usually erroneous.

[jainen]

hidden cost

Banks are beginning to use the term "business lease" for a certain type of credit line. Instead of leasing a machine from the manufacturer or dealer, you purchase it outright. The bank lends you 100% of the price, including taxes and fees, and holds a lien on the equipment. Typically the payments are structured so that you can buy it for $1.00 at the end of five years, so it really is a purchase finance arrangement and you can take depreciation on the asset.

Like a traditional lease, this allows you to acquire equipment with little or no down payment. There is usually a major hidden cost in that you must have a minimum savings account at the bank, which dramatically raises the effective interest rate in a way that only a banker will recognize.