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A commercial equipment lease is a financing option for companies planning to rent equipment for their operations. And instead of buying the equipment outright, organizations can lease equipment for a specified period and make payments based on the terms of the lease agreement. Besides, this financing alternative offers several benefits to companies, including flexibility, cost savings, and tax benefits. Therefore, it might not be wrong to say that renting commercial equipment is a convenient way to get your business's right assets and services, as it can help you reduce the cost of ownership, which means more money in your pocket.
Commercial Equipment Lease: An Overview
A commercial equipment lease is a contract between a lessee and an investor. It lets the lessee utilize the commercial property of another for a fixed period, with both parties agreeing on what they will pay each other in exchange for using that property.
The property owner pays for any costs associated with maintaining or conducting their business (such as utilities or repairs). They also settle any maintenance expenditures they incur while you're utilizing it. In simpler terms, you don't own any assets—you're merely renting them from their owner. Furthermore, the lease will specify the terms and conditions of your use of the property, including:
- What you can do with it
- How long can you utilize it for
- How much do you have to pay each month or year
The amount of money you'll be responsible for paying if you violate the lease early and how much notice you must give before moving out. And commercial equipment leasing is a common way for businesses to access expensive machinery, tools, or technology. It's also used by individuals who want to own a property but can't afford it right away—they may choose to lease instead of rent so that they have time to save up for their purchase.
Leasing is also a useful tool for businesses that are growing quickly. While you can't afford to buy all the equipment you need at once, you may not have enough cash flow to finance it. Leasing allows you to start immediately without worrying about how much your payments will be or whether your business will succeed.
Top Equipment Covered by Commercial Leases
Commercial leases are a fantastic way to secure your company's business property. They cover many equipment types and can be used for office computers, computer systems, and other business property. Moreover, the type of equipment that can be leased will depend on the specific needs of the business and the leasing company's policies. Some key equipment types covered in commercial equipment leases are as follows:
Computer Hardware & Software
You can lease desktop computers and laptops for use at your office location if you do so within the scope of a commercial lease agreement with your landlord/tenant representative.
The type of computers you choose will depend on your business, but it's important to consider that your lease agreement may not cover replacing broken equipment or paying for upgrades in the future. You can include a clause in the contract that allows you to replace or upgrade the computer hardware & software without additional fees as long as they meet the minimum requirements your landlord/tenant representative set forth.
The same is correct for other types of business equipment, such as scanners, printers, and fax machines. You can also include software usage in your lease agreement if you do so within the scope of a commercial lease agreement with your landlord/tenant representative.
In addition to these items, you can also include clauses in your lease agreement that cover the cost of utilities and cleaning services. You may also want to incorporate a clause that allows you to paint the walls or install new carpeting as needed within the scope of a commercial lease agreement with your landlord/tenant representative.
Office furniture like chairs, desks, or tables is typically included in commercial leases. You might also include other types of office furniture, such as cubicles or partitions, if you have business expansion plans.
Understanding Commercial Equipment Leasing Options
Several leasing options are available to businesses, including operating and finance leases. Operating leases are short-term leases, typically for one to five years, that allow the business to use the equipment for a set period. After the lease term, the business returns the equipment to the leasing company, and the lease is terminated.
Finance leases, on the other hand, are long-term leases, typically for three to ten years, that give the business the option to buy commercial equipment at the end of the lease term. The leasing business owns the equipment during the lease term, and the business makes payments based on the terms of the lease agreement.
Likewise, commercial leasing equipment is a way to finance equipment purchases. With leasing, you can avoid the hassle of financing or paying cash for your purchases in full upfront. You will pay lease payments over time, usually tax deductible as business expenses. The amount you settle will depend on how much equipment you want to purchase and how often it needs servicing. Some common commercial equipment leasing options are as follows:
- Capital Expenditure - This option combines elements from both types of leases by allowing businesses with limited capital budgets access certain assets without having them purchased outright during this fiscal year; however, unlike equipment leases where there's no limit on what kind of item(s) can be acquired through this method only applies when using cash flow generated by sales instead of company funds.
- Equipment Leasing - This alternative allows companies with restricted capital budgets to purchase needed items on credit terms instead of purchasing them outright during the current fiscal year (usually 12-24 months).
- Operation and Maintenance - This option combines elements from both types of leases by allowing businesses with limited capital budgets access certain assets without having them purchased outright during this fiscal year; however, unlike equipment leases where there's no limit on what kind of item(s) can be acquired through this method only applies when using cash flow generated by sales instead of company funds.
Advantages of Commercial Equipment Leasing
Below are some key benefits of commercial equipment leasing.
- Cost Savings: Leasing equipment can help businesses save money in several ways, including avoiding the need for a large upfront payment, avoiding depreciation and maintenance costs, and allowing for more efficient use of capital.
- Flexibility: Leasing equipment allows businesses to acquire needed equipment without making a large upfront payment. This financing option also provides flexibility in terms of the type and amount of equipment that can be leased and the length of the lease term.
- Tax Benefits: Commercial equipment leasing can provide businesses with tax benefits, such as the ability to deduct lease payments as a business expense, which can help reduce taxable income.
- Lease Contract: A written agreement between the landlord and tenant that summarizes the provisions of the lease, including the term, responsibilities of both parties and rental payment.
- Equipment: The property being rented, such as a truck, car, or piece of machinery.
- Rent: The amount paid by the tenant to the landlord for the use of the equipment, monthly or yearly
- Term: The term of the lease, usually described in months or years.
Commercial equipment leasing is a financing option that offers businesses several benefits, including flexibility, cost savings, and tax benefits. Several leasing options are available, including operating and finance leases, and a wide range of equipment can be leased. When considering commercial equipment leasing, it is important for businesses to carefully review the terms of the lease agreement and understand the responsibilities and obligations associated with the lease by consulting our expert attorneys at ContractsCounsel.
Meet some of our Commercial Equipment Lease Lawyers
October 26, 2021
I am a startup veteran with a demonstrated history of execution with companies from formation through growth stage and acquisition. A collaborative and data-driven manager, I love to build and lead successful teams, and enjoy working full-stack across all aspects of the business.
October 23, 2021
I'm an employment lawyer. I counsel and represent employees in all professions, from hourly workers to doctors and executives, and all in between. I also counsel and represent employers in many aspects of employment law.
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Elbert Thomas is the founder of the Thomas Law Group, LLC. Elbert is proficient in contract creation, drafting, reviewing, and negotiating various business contracts and demand letters in industries such as construction, personal, professional services, non-profits, and real estate. Elbert typically represents small and large companies in drafting and negotiating countless agreements such as purchase sale agreements, interconnection agreements, lease agreements, demand letters, cease & desist letters, transfer of deeds in real property, and merger/acquisition agreements. In addition, Elbert is also experienced in start-ups, small business formation, drafting operating agreements, and estate planning.
October 18, 2021
I am a solo practitioner and the founding attorney at Uzay Law, PLLC, which provides legal services in immigration and contracts. I am licensed to practice law in Texas. Prior to practicing law, I worked as a producer and film consultant in New York for over fifteen years. I am fluent in English and Turkish.
October 21, 2021
As an entrepreneur at heart, I enjoy working with business owners and executives on a variety of corporate matters, including mergers and acquisitions, corporate financing, corporate governance, public and private securities offerings, privacy regulation and early-stage corporate matters including formation. As a lawyer and business professional, I understand the value of providing personal service and focused legal answers to clients navigating a rapidly changing regulatory environment. Whether in Aerospace, Consumer Goods, or Technology, I find great success in work collaboratively with clients to strategical structure their business or implementing strategic growth-oriented financing opportunities.
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Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Lover of Dogs, Cribbage, Craft Beer, Bourbon, and Cigars
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Licensed attorney in KY and Federally JD, 2006 University of Louisville MBA, 2006 University of Louisville BS, 2001 Berea College Licensed Title Agent Arbitrator and Certified Mediator Business Consultant Adjunct Professor, Law and Business