Capital Lease Structure
A Capital Lease is usually structured with a required nominal end of lease payment. At the end of the term of the lease, the title to the equipment is transferred to the lessee upon completion of the lease obligations. Such a lease must be shown as an asset on the balance sheet of the lessee and be depreciated or capitalized over the term of the lease.
Benefits of a Capital Lease
A major benefit of a Capital Lease is the lease provides additional financing options to the lessee. Unlike a traditional equipment finance loan, in many cases a Capital Lease can provide for 100% equipment financing.
A Capital Lease can be designed with the following flexible options:
- Installment loan-type financing can be provided without a down payment requirement
- Fixed price or fair market value purchase option at the end of the lease
- Longer lease terms can reduce monthly payments
- Capital leases can be structured with unequal payment terms