The most popular form of equipment financing is a called a capital lease (often referred to a $1 buyout). With this contract, when the lease term is complete, $1 is due and the equipment is owned free and clear. This will type of financing will show up as a liability on the organization’s balance sheet. This lease is best suited for clients who wish to hold onto their equipment investment long after the lease is complete.
Another form of equipment financing is called an operating lease (often referred to a fair market value (FMV) lease or “off balance sheet financing”). With this contract, when the lease term is complete, the client owes the fair market value of the equipment, which usually ranges from 10% – 20% of the price paid, not including delivery, installation or taxes. This type of financing will NOT show up on as a liability on the organization’s balance sheet. This lease is designed for facilities who need to upgrade their equipment on predictable cycles (3 – 5 years). Facilities with high traffic and usage are great candidates for this type of lease.
Municipal leasing local and state government agencies such as schools, community recreation centers, police and fire departments can take advantage of special leasing programs designed for municipalities.
Which type of financing is best for you? Please reach out to a fitness design consultant to learn more.