Finance Lease Structure
A finance lease generally has a term in excess of 36 months, and is usually structured with fixed price purchase options for the equipment at the end of the lease. 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 Finance Lease
A major benefit of a Finance Lease is that, in addition to providing needed capital, the lessee may still enjoy some options available to the lessee at the middle and end of a traditional operating lease.
A Finance Lease can be designed with the following flexible options:
- Mid-Term Options
- Terminate the lease if the project ends
- Upgrade if needs expand
- Refinance to reduce monthly payment
- End-of-Lease Options
- Purchase equipment at a fixed price
- Continue to rent on a monthly basis
- Return equipment to the lessor