As a business owner, you may need to acquire equipment to run your operations effectively. However, purchasing equipment can be a significant financial burden, especially if you’re a small business owner. That’s where equipment leasing comes in. Equipment leasing is a financing option that allows businesses to rent equipment for a specified period, with the option to buy or return the equipment at the end of the lease term. To help you understand the equipment leasing process better, we’ve put together this equipment leasing glossary that will help you navigate the terms and language used in equipment leasing:

Lessor: The leasing company or financial institution that provides the equipment to the lessee for a specific period.

Lessee: The business or individual who leases the equipment from the lessor and pays a periodic rental fee.

Lease term: The duration of the lease agreement, usually ranging from 12 to 60 months.

Fair market value (FMV) lease: A type of lease where the lessee pays for the use of the equipment for a period and has the option to purchase the equipment at its fair market value at the end of the lease term.

Capital lease: A lease agreement where the lessee takes ownership of the equipment at the end of the lease term.

Equipment financing agreement (EFA): A loan agreement where the lessee borrows money to buy equipment.

Operating lease: A lease agreement where the lessee doesn’t take ownership of the equipment and returns it to the lessor at the end of the lease term.

Master lease: An agreement that covers multiple pieces of equipment leased at different times.

Residual value: The expected value of the equipment at the end of the lease term.

Purchase option: An option for the lessee to purchase the equipment at the end of the lease term.

Soft costs: Non-equipment costs, such as installation, delivery, and taxes, that can be included in the lease agreement.

Maintenance agreement: A service agreement that covers equipment maintenance and repair during the lease term.

Upfront fees: Fees charged by the lessor at the start of the lease term, including security deposit, administrative fees, and first and last month’s rent or needed repairs on items to be protected by the lease.

End-of-term options: Options available to the lessee at the end of the lease term, including returning the equipment, purchasing the equipment, or extending the lease term.

Section 179 tax deduction: A tax deduction that allows businesses to deduct the full cost of the leased equipment in the year it was purchased, subject to certain limitations.

Understanding these equipment leasing terms will help you make an informed decision when choosing a leasing option for your business. As with any financial decision, it’s crucial to review and understand the lease agreement thoroughly before signing it.

At Scientific Equipment Source, we offer leasing options to help you acquire the equipment you need to run your operations effectively. Contact us today to discuss your equipment leasing needs and find the right leasing solution for your business.

Scientific Equipment Source

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