Omega Design Corporation offers an alternative to the capital budget process and traditional debt financing through Omega Financial Services.
The Omega Financial Services Leasing Program has been specifically designed to accommodate the budgeting, tax and accounting requirements from our customers and it features competitive interest rates which can be lower than traditional bank financing.
You may be able to benefit from important tax and accounting benefits through leasing that lower the net acquisition cost of new equipment.

How Leasing Can Reduce Project Costs

Financial Reporting:

    Financial reporting of equipment acquisitions is critical because the equipment must be capitalized as an asset on the balance sheet with a corresponding liability for any debt associated with the transaction. Depreciation and interest expense, if applicable, represent the financial statement cost of acquiring the equipment.
For accounting purposes, the details of a qualified Operating Lease transaction are not required to appear in the lessee's financial statements. There are no entries in the balance sheet for either assets or liabilities, although certain information should be included in the notes to the statements. Operating Leases are attractive because they improve the most financial ratios and measurements of the lessee which creates a less leveraged position. Overall reported earnings are increased because the lease payment expense is less than the depreciation and interest expense for a loan.

Case Management:

    Traditional bank financing often covers only 80-90% of equipment cost. Leasing usually requires often only one or two rental payments in advance-and can include all other acquisition costs, including operating materials. Retained cash can be used for more profitable working capital requirements. All Operating Leases defer a significant portion of the total equipment cost to the end of the lease term, which makes monthly payments more affordable than conventional loan financing.

Capital Budget Constraints:

    Leasing usually avoids the multi-level capital approval process. Leases can be funded through an Operating Budget, Capital Budget, or a combination of both.

Deductibility of Rentals:

    Operating Lease payments are fully deductible against income for federal income tax purposes, which provides a significant tax benefit when compared to traditional debt financing.

Negative Impact of Additional Purchases:

    Recent tax law changes may penalize a company for purchasing equipment. A business that is approaching the Alternative Minimum Tax (AMT) or the mid-quarter depreciation convention will be penalized when purchasing new equipment by having to pay additional taxes due to the loss or reduction in value of certain tax benefits.

Use Versus Ownership:

    The use of equipment is much more important than a document conveying title, as it is the use of the equipment that produces the profit-not ownership. Leasing general results in lower acquisition costs, which implies greater profitability.

Non-Restrictive Financing:

    Banks often build restrictive loan covenants into business loan agreements, which typically include current ratio, debt-to-equity ratio limits, and other minimum measures of profitability. In theory, even a relatively minor technical violation of any of these criteria may influence the lender to request that the loan obligation be repaid or restructured.

    Lease agreements do not contain restrictive covenants that can reduce a company's decision making autonomy and independence. The lessor will build its perceived risk into the pricing of the lease and will consider the collateral value of the leased equipment, should the need to repossess it arise. Leasing offers greater flexibility; and does not restrict the lessee's future financing options.

Leasing Vs. Cash or Debt Financing:

    Leasing costs can be measured against historical ROI or comparable debt financing. We offer a statistical analysis of these factors upon request - at no charge. Our financial model is based upon a comparison of the timing of the cash flows (including the effect of rental deductions, applicable tax credits and the residual value of the equipment) which result from each method. We use discount rates (typically ROI or cost of capital provided by the prospective lessee) to indicate the time value of funds, then separate each method and present the cash flows that would result for each alternative.

Cash Information:

    Equipment lessors routinely ask for specific financial data as a requirement of the lease approval process. Typically, this includes the prior two years Y/E audited (or accountant prepared) financial statements and current interim statements. In some cases, a review of corporate tax returns for the corresponding period is requested.

Tax and Accounting Impact:

    Most federal and state tax statues are subject to some degree of interpretation. To determine the specific tax and accounting attributes of the attached equipment leasing proposal (and its effect on your business) we recommend that you review this information with your company's CPA or accounting professional.

    For additional information concerning leasing, please contact our leasing department directly. Our leasing staff can be reached toll free at 1-800-829-9266 between 8:30 am and 5:00 pm (Pacific Time) Monday through Friday or click on the following link to our strategic partner: www.ampaccapital.com.