A tax-exempt lease is essentially an installment loan. An investor lends funds to the borrower to purchase equipment and complete any related renovations, and the borrower agrees to make payments on a periodic basis (monthly, quarterly, or semi-annually). Generally, the borrower leases the equipment for a length of time approximating the useful economic life of the equipment. At the end of the lease term, the borrower typically pays a nominal amount (usually $1) and assumes ownership of the equipment.
A tax-exempt lease offers interest rate savings; it is as simple as that. Interest rates available through the Value Lease Program may be 2% to 4% below taxable rates, providing substantial savings.
Value lease is appropriate for all types of equipment purchases of $500,000 and up. Ideally, a project should include at least one large asset or group of related equipment. In addition, smaller items such as automobiles, computers, or patient-room television systems can be financed (as long as the smaller items represent a modes component of an overall project). Renovation and installation costs may be financed as part of a project, up to 20% of the overall financed amount.