Leasing is Faster Than the Boardroom

By | March 27, 2023

Ok this blog has a silly title, but you’ll understand it in a minute. 

fast equipment financing

The “leasing vs. financing” question has a lot of layers, and I’ve explored a lot of them in this blog over the years (like “vehicle leasing vs. financing”, and the “differences between a capital lease and an operating lease”.) 

But one thing I haven’t talked about too much is the off-balance sheet aspect of an operating lease, and how it relates to board approval. And I had a situation crop up recently that perfectly exemplified this.

Many companies, especially larger entities, will utilize a board of directors that makes company decisions. Now let me start by saying a corporate structure requires a board, but in the case of many corporations, the “board” is a two person entity (husband and wife, business partners, relatives, etc.)

But in other companies, especially once the company is larger and more complex, there’s an actual board of directors. And this board of directors makes decisions. And one of those decisions may be acquiring new assets.

In other words, there are many companies who cannot acquire a new asset without board approval. Now this isn’t super-limiting – after all, most board members became board members because they are smart businesspeople, and if a company needs something, it needs something. 

But sometimes getting a timely meeting to approve a new asset can be troublesome, and if time is of the essence, this can be detrimental. 

In the example I’m giving, a company was in the middle of an important project. There was an unforeseen problem, and the company realized they needed another piece of equipment quickly. Getting a meeting together for board approval was going to take two weeks. That kind of time would have put the project hopelessly behind schedule, and also may have cost money, as another rate increase was imminent. What to do?

Lease it. Lease it with an Operating Lease. 

Operating leases are off-balance-sheet. The company doesn’t own the item, and it doesn’t appear as an asset. Most importantly, it then doesn’t need board approval if that’s how your company works. Two weeks turns into two hours. 

Mind you, I’m not advocating anything nefarious or “hiding” anything from the board. It’s more about making sure a rule (“board approval needed, and we’ll talk at next month’s meeting”) doesn’t get in the way of production.

Now do you understand why leasing is faster than the boardroom? 

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