• Equipment Refresh for Stations? Part 2....

    Loan Vs. Lease
    A lease typically refers to an arrangement where one party who owns or controls equipment, called the lessor, transfers possession and use of that equipment for a period of time to another party, called the lessee, in exchange for the payment by the lessee to lessor of periodic rent (i.e., monthly, quarterly or semi-annually). A loan refers to an arrangement where the lender finances the acquisition of an asset by the borrower with the commitment of repayment of principal and interest, usually with a secured interest in the asset financed.

    What are the Benefits of leasing?
    Businesses typically choose to finance equipment when they wish to achieve one or several of the following objectives:

    100 Percent Financing
    A lessee or borrower (sometimes collectively called a "customer") may be able to arrange 100 percent financing of equipment. Costs include hard costs such as the equipment and soft costs such as shipping and taxes, design costs, installation costs, transportation fees, training fees, software, and any service contract fees.

    Preservation of Capital
    Making large capital expenditures in equipment often represents major financial risk, especially for small companies. Equipment financing can help mitigate the uncertainty of investing in a capital asset that may enable a business to achieve its desired return, increase efficiency, save costs and apply capital to more pressing needs of its operations.

    Hedge Against Inflation
    Equipment financing may hedge inflation risk. For instance, instead of paying the total cost of equipment at once and large down payments, a business may delay the use of its funds until the date on which it makes a lease payment. The delay makes its cash worth less to the lessor because of inflation. The business also gets to use its cash during the lease term instead of spending it up front on a purchase. In addition, either a lease or loan can lock in the rates that exist on the date of the closing. In other words, the finance company absorbs the devaluation of a customer's payments over time due to inflation and other financial risks.

    Improved Expense Planning and Business-Cycle Flexibility
    Financing equipment helps maintain cash flow and greater certainty in budgeting by setting customized rent payments to match cash flow Ð even seasonal cash flows.
    Regular Technology UpdatesBy funding technology equipment under leasing, loan or other financing, companies are often able to acquire more and better equipment than they could have without financing. Certain leasing finance programs can also allow for technology upgrades and/or replacements within the term of the lease contract.

    Tax Considerations
    Tax-oriented leases should produce lower rents since the lessor retains title and depreciation. A tax-oriented lease refers is a transaction that includes the value of tax benefits. Conversely a conditional sale or loan enhances tax benefits of higher deductions to the lessee/borrower
    Relationships with Equipment ExpertsSome finance firms offer equipment, software and/or services as a bundled financing, improving cash flow and shifting risk to the equipment finance company in many cases.

    Obsolescence Management
    When a lessor owns the equipment in a true lease, the lessor bears the risk of the equipment used by a business becoming obsolete.

    Dependable Asset Management
    Many financing companies can help track the status of equipment, know when to upgrade or update it, and can provide services relating to installation to use, maintenance, de-installation and disposal of the equipment.

    Product and Service Bundling
    Certain financial products allow customers to finance the entire cost of equipment, including installation, up-front maintenance, training, and software charges, thereby packaging systems and ancillary products and services into a single, easy-to-manage solution.

    Equipment Disposal
    Equipment management by a third party, such as an equipment financing company, should enhance the ability of a business to focus on its core operations. In the case of computers and other technology devices, these companies may also agree to dispose of equipment. This service should prevent the lessee or borrower from incurring legal penalties for improperly disposing of such assets because disposal is often regulated by federal, state and local governments.

  • Equipment Refresh for Stations?

    In these unusual economic times, lots of Chief Engineers at local TV stations are going through the annual budget submission process, just like they have in the past. Only thing is, this time around, the budget approvals may not be coming back from corporate the way they used to. Many stations are either living with the equipment complement they have, or are spending way less than they used to. Of course, the problem with this is that stations are not being asked to maintain the status quo in their operations. Instead, management and the public expect ever new innovative ways to reach their audience. Web Video, Mobile Video, DTV, HDTV.... the list goes on and need not be repeated here. We all know what I'm talking about.

    So how can a station refresh, expand, and generally continue their migration to automated, file-based workflow that unleash these innovations, free the staff from mundane tasks, and generally allow a station to improve its competitive position in the market?

    This question has been addressed, of course, by many industries faced with similar circumstances. Perhaps it was the good fortune of a 75-year run of luck that allowed broadcasters to largely avoid this question until now, but it seems we must now consider what others have in order to move ahead.

    The answer many industries and companies have found over the years is to leverage the relatively easy availability of commercial leasing. When TV stations were "cash registers," as the old adage goes, nobody needed to think about such things. These days, however, commercial leasing might be just what the doctor ordered!

    Traditionally, TV stations would just write a check for the entire amount of any equipment, software, and services purchases. But in these challenging times, why limit your options to this one method of payment? Why not do what most industries have been doing for years and finance purchases through a commercial leasing lender?

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