Income Tool Time

The leasing revenue & COGS model is very different than a product or services business. To a leasing company, revenue is the periodic interest income generated each month over the term of the lease, let’s say at a rate of 15%. The leasing company borrows money at say 8% to buy the equipment and match-fund the equipment lease, let’s say through a term loan (recorded on the balance sheet & amortized to the P&L to match the revenue stream). This is not like revenue & COGS on a product company P&L. Further, the lessee may be required to make a down payment and say first & last month rents, reducing the funding requirement and accelerating the cash flow back to the leasing company & effectively increasing the profitability to the leasing company. Last payment must also be deferred on the balance sheet. From a tax perspective the leasing company also depreciates the equipment asset.

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