Healthcare Finance & Reimbursement - Lease

Healthcare Finance & Reimbursement - Lease

Economic Factors That May Motivate Leasing As Opposed To Buying

Several economic factors are available that motivate companies or individuals to go for lease as opposed to buying, including financing sources diversification, less restrictive type of financing, additional source of debt financing, and flexibility. Mostly the companies maintain revolving lines of credit and other credit lines with its key banking relation. But these credit lines are typically restricted by some maximum dollar amount that can be borrowed. Therefore, business utilize lease financing for its asset requirements and thereby be able to keep their key credit lines available for other financing requirements they may face during the year. Similarly, companies are well aware of the risk of depending on just conventional sources of equipment financing, and therefore, diversifying their financing sources makes good sense whether credit is in short supply or not (Baker & Baker, 2009).

Leasing offers a greater flexibility to companies, since this option provides an opportunity to make the most of lease structuring variables like amount of advance payments, number of payments, options of purchase, and others. Some lease arrangements allows businesses the option of ether purchasing the equipment at the stated amount or the Fair Market Value, or renewing the lease at a decreased per month payment. In addition, when companies borrow money for purchasing an asset from banks, they typically have to face the restrictive loan covenants into their loan agreements. These covenants are utilized by banking institutions in order to minimize or at least bring to its consideration any possible default on the loan by the borrower. On the other hand, lease agreements hardly ever comprises of restrictive covenants, therefore offers greater flexibility and freedom as compared to loan (Baker & Baker, 2009).

Leasing Preserves Liquidity

Preserving liquidity ...