With our economy showing mixed signs of an upswing, individualsand businesses alike are looking for avenues that provide the mostcost savings and stability during these trying times–andindependent insurance agencies are no exception.

Credit remains difficult to come by, and cash in the bank is anecessity. Credit risk requirements have tightened across theboard, with lenders critically concerned about quality overquantity. Meanwhile, agents still have a business to run.

The typical insurance agency requires little capital for dailyoperations. However, there are instances such as expansion andacquisition that create substantial capital needs. In this economy,these occasions are becoming increasingly more difficult tonavigate from a financing perspective.

To supplement your everyday financing plans, you might considerequipment leasing. This option allows you to reserve use of youragency's bank credit lines, while still having the capability tooutfit your offices with necessary business equipment.

Free-flowing capital is every company's number-one issue.Necessary expenses to retain and promote business growth are eatingup credit lines, and there is a shortage of other cash sources.

Leasing your business equipment can drastically increase youragency's financial agility, allowing you to conserve bank creditand keep cash that you can put back into your business for bothoperational and investment needs.

With lower monthly payments, your cash is not tied up inequipment, and instead the money can be available for marketing,working capital or managing cash flow through seasonality.

With technology and equipment changing at a fast pace, it hasbecome increasingly important to keep your business competitive andon the cutting edge, rather than focused on ownership andmanagement of the equipment you use.

Ownership can be risky, given the rate of equipment depreciationand obsolescence. There are also new environmental regulations toconsider, which dictate proper disposal methods for technologydevices that may be costly and time-consuming for your agency tocomply with.

Given that under a lease, the lessor is typically the owner ofthe equipment, this structure allows you to remove most of theburdens associated with equipment ownership and disposal.

To keep up with our rapidly changing market, chances are you'llwant to upgrade your computers, software and maybe even your phonesystem over the next two years. You may even need to add personnelor move into a different office.

Leasing can help you manage the demands of upcoming financialchallenges and assist your overall business plan.

THE ADVANTAGES

Leasing offers flexible options and terms depending on yourneeds.

The three most common lease types are Fair Market Value (FMV),Fixed Price Purchase Option (FPPO) and the $1 Purchase Option ($1Out). All three options typically offer 100 percent financingwithout any kind of cash outlay before your equipment is put intoservice.

o A Fair Market Value is a lease that wouldallow a business (lessee) to pay for the actual use of businessequipment without taking on much of the obsolescence, maintenanceand disposal risks of ownership. This lease type will offer thelowest monthly payment and terms typically up to 60 months.

Lessees can opt to trade up or add equipment during thelease–and when the term is complete, it may be extended or theequipment can be returned or purchased.

o The Fixed Price Purchase Option provides thebenefit of ownership to the lessee, with slightly higher monthlypayments. With this type of lease, the lessee may be able to takedepreciation and interest expense and can add on equipment duringthe term of the lease. The Fixed Price Purchase Option lease hasthe same end of term options of the Fair Market Value.

o The $1 Purchase Option comes with highermonthly payments, but also provides ownership to the lessee if heor she so chooses. As the name indicates, it allows the lessee topurchase the equipment for $1 at the end of the lease term.

Not only does leasing offer flexibility, it also offersfinancial advantages that help you save money.

One hundred percent financing allows you to generate income fromyour equipment before paying a single bill. Most often you willhave 30 days to use your equipment before making your firstpayment. Leasing can offer tax advantages, but they may not applyto everyone. Please consult with your tax accountants on how theymay benefit your agency.

There are also several other options to think about that canaffect the final cost of leasing that you need to consider beforesigning that contact. These are:

o One hundred percent financing may include “soft costs” such asservice, maintenance and installation in your monthly payment.

o Fixed payments are available, locking in your rate to avoidinflation in the future.

o There are multiple purchase and renewal options available,giving you the best solution to fit your individual needs.

o Leasing frees up your working capital to be used for otherbusiness needs, or to store on your balance sheet.

o Take advantage of a Master Lease Agreement, allowing you tocombine multiple pieces of equipment onto a single lease with onemonthly payment.