All the answers to your unique business lifestage questions
A lease is a lease is a lease - right? Wrong! There are quite a few different options you should consider before signing on the dotted line:
Financial leases are the most common by far and are usually written for a term not exceeding the economic life of the equipment. You pay a fixed monthly fee and ownership of the equipment reverts to the owner (lessor) at the end of the lease term. The lease cannot be cancelled and you (the lessee) are responsible for maintaining the equipment.
In an operating lease or "maintenance lease", maintenance of the asset is the responsibility of the lessor. Computer equipment and vehicles are often leased this way. An operating lease can usually be cancelled under conditions spelled out in the lease agreement.
Sale and leaseback is similar to the financial lease. The owner of an asset sells it to another party and simultaneously leases it back to use for a specified term. This arrangement lets you continue using the asset while freeing up the money paid for it, to use elsewhere. Buildings are often leased this way.
Net or gross leases describe the conditions of a lease in terms of maintenance, taxes and insurance. In a net lease you pay these expenses while, under a gross lease, the lessor is responsible.
Financial leases are usually net leases. A full payout lease is when the lessor makes back the full purchase price of the asset during the period for which it is leased.