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Education

This combination of business objectives gives you the
opportunity to make a commission from the equipment I, however, have never
leasing company, as well as from the manufacturer upon
successful completion of the entire transaction. For example, recommended leasing a credit card
your merchant might be looking for a $200,000 piece of terminal to a merchant. Due to my
operational equipment. You might have a contract with an
equipment manufacturer to resell their equipment, as well customer-first approach, I believe
as a network of equipment leasing companies looking to buying a terminal wholesale has
setup a lease program on an equipment acquisition.
always been the better option for
You could get, let's say, a 7 percent commission from merchants, thus, that is the option I
the equipment leasing company on a lease approval
amount of $200,000, which would come to $14,000. Then have recommended.
your equipment buy rate from the manufacturer could
be $194,000, and you could mark it up to $200,000 for
resale. Thus you would make $6,000 from the equipment interest costs are spread throughout the lease
sale. This is a total of $20,000 earned from one piece of term, and the merchant owns the equipment at
equipment. You just need to do five of these transactions the end for usually a $1 buyout.
per year to bring home $100,000.

Leasing basics • Skip lease: This is for seasonal merchants who
can't make payments every month. With this
In the payments industry, lease is a contract between a structure, merchants will have months when they
leasing company (known as the lessor) and a merchant make no lease payments and then some months
(known as the lessee). The lease gives the merchant the when they make lease payments.
right to use the equipment for a specific period of time • Step up lease: This is basically a situation in
(known as the lease term), in exchange for a specific which a lease payment would start out low but
payment (the monthly lease payments). increase over time due to a piece of equipment
being expected to generate more profits for the
Within this transaction, the leasing company would merchant as time goes along.
(usually) purchase the equipment from the manufacturer
and have the manufacturer ship it to the merchant's • Deferred lease: This is for merchants who need
location. The leasing company makes its money back from equipment right away, but their operations will
the lease payments and makes profit by receiving a higher not generate revenue for about 90 days. So with
lease payback amount from the merchant than the cost of this structure, merchants would be provided
the equipment purchase. the equipment but not expected to make their
first lease payments until approximately 90 days
With most leasing options, when the lease term ends, the thereafter.
merchant will be provided a number of choices on what
to do with the equipment. The merchant could purchase • Master lease: This is used when a merchant might
the equipment, return the equipment or set up a new lease be leasing multiple pieces of equipment over a
contract. period of time. This contract would be used to
manage the leases more efficiently than having all
Leasing options of them dealt with separately.

There are several leasing options a merchant can choose • Sale leaseback: This is for merchants who have
from, including the: already bought equipment and want to use it

• True lease: Merchants usually use this structure if for working capital purposes. In this situation,
the equipment might depreciate rapidly (become merchants would sell their equipment to a leasing
obsolete), so it wouldn't make sense to purchase it. company, get capital upfront, and then sign a lease
This option usually has lower payments, is better contract with the leasing company to lease the
for tax planning, and offers the choice of returning equipment back to them.
the equipment, purchasing the equipment, or
doing another lease contract at the end of the John Tucker has over 10 years of professional experience in commercial
current lease term. finance and business development. He is also an M.B.A. graduate and
holder of three bachelor's degrees in accounting, business management
• Capital lease: This is used usually when a and journalism. To connect with John, please send him a connection
merchant knows upfront that he or she plans
to buy the equipment. The purchase price and invite via LinkedIn at www.linkedin.com/in/johntucker99.

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