| Tuesday, September 26th 2023
This lease, for accounting purposes,
must be capitalized. That is, it must be booked as an asset
with an offsetting liability on the Balance Sheet. However,
it may still qualify as a true lease, so the lease payments
can be made with "before tax" dollars, like rent. Thus, Uncle
Sam helps the farmer pay for the equipment.
Purchase Renewal Option (PRO) Lease:
This lease is similar to the Finance/Capital
Lease, but the Lessor retains the depreciation. This is a
true lease, and the payments are fully tax deductible by the
farmer, lessee. Thus the farmer gets a lower lease payment
because of the tax benefit to the Lessor.
This type of lease must meet very
specific accounting tests as required by the American Institute
of Certified Public Accountants (AICPA). This lease is not
recorded on the farmer's balance sheet. The payment is an
operating expense and the lease appears as a footnote to the
farm financial statements.
Lease Credit Line:
A Lease Credit Line gives the farmer
lower lease rates when the farmer has determined his total
equipment requirements for the next year. The Lease Credit
Line allows individual equipment lease takedowns, when the
equipment is needed.
Special Leases Requiring Interim Payments
Interim payments are often required
when leasing structural equipment, such as grain bins, equipment
for cotton gins, hatchery and dairy equipment. The manufacturer
or the vendor often requires progress payments or “interim
payments” as the equipment is being installed. We will accommodate
this need, and the Lease will not commence until the leased
asset installation is complete and is accepted by the lessee.
TRAC (Terminal Rental Adjustment Clauses)
This lease helps preserve working capital, decrease costs
associated with vehicles, and increase profits. Advantages
include competitive financing rates, low monthly payments,
off balance sheet financing, and tax-deductible lease payments.
In addition, TRAC leases carry NO penalties for mileage
and wear and tear. Most new cars, light trucks, and heavy
trucks are eligible for TRAC leasing.