Equipment Leasing


What is a Lease?

A lease is an agreement that the lessee, or business owner(s), agree to pay the lessor, the leasing company or manufacturer, to have use of the equipment for a specified period of time. A lease payment is recorded on the CrossFit Box’s books as a rental payment similar to a rent payment on a building lease. Leasing enables owners to preserve their working capital as an alternative to purchasing the equipment since a typical lease requires a relatively small upfront deposit. Boxes profit from a lease transaction if the gym generates revenue in excess of the monthly lease payment, thus generating positive cash flow from the use of the equipment. Lease repayment terms range from 12 to 60 months. Consequently, items that do not have a useful life of at least 12 months — such as inventory — should never be included in a lease agreement.

A typical lease uses the fitness and non-fitness equipment being financed as the collateral. Owners need strength equipment, cardio equipment, lockers, security systems, computer systems, software, flooring and signage to build a new Box and to expand their existing business. Consequently, all of these items can be included in a lease since they are required to conduct business in our industry.

What are the main benefits of leasing?

  1. Conserve Working Capital — This is unquestionably the biggest benefit of leasing. If you have significant liquid assets, leasing may not be for you. On the other hand, if you have limited liquid assets, preserving cash by leasing your equipment may be the difference between success and failure.
  2. Tax Benefits — When a company pays cash to purchase equipment, the business books the asset purchase at cost, estimates the useful life of the equipment and depreciates the equipment cost equally over this time period, lowering their tax liability. Alternatively, if the equipment is leased, the total of lease payments will exceed the cash price. However, since lease payments are booked as a business expense, this additional cost further lowers tax liability. This calculation should be considered when estimating the true cost of leasing compared to paying cash for the equipment purchase.
  3. Lease to Own — The leasing company owns the asset throughout, and the agreement is considered to be the full economic life of the asset. At the end of the lease term, there is an option to purchase the equipment for a nominal fee.

What are the key conditions to receiving a lease approval?

  1. Credit:
    • Personal Credit — Leases for less than $25,000 require good personal credit only. A 700-plus credit score is now required from “A” lenders and credit scores of 650-plus is typically required by “B” lenders. “A” lenders will typically approve higher amounts and the monthly payments are less per $1,000 approved. Nearly all lease transactions are guaranteed by company owners with more than 10 percent equity in the company.
    • Business Credit — Business credit scores for companies are recorded by Dunn & Bradstreet, and Paynet. All owners should check that the information reported about your company by these agencies is correct before applying for financing.
  2. Collateral — Since not everyone has a 650-plus credit score, and not everyone owns a company that reports a net income and has good business credit, there are “C” lenders that will offer leases requiring additional collateral which translates to posting marketable securities, CDs or real estate as additional collateral to secure the lease.
  3. Cash Flow — For larger lease amounts, the key to receiving a lease approval is reporting positive cash flow. Most underwriting formulas will total the company’s net income and depreciation, a noncash expense, to calculate free cash flow. The resulting free cash flow must exceed the annual lease payments by some margin for the requested amount. For example, if the company reported $75,000 net income and $50,000 in depreciation, an underwriter may consider that at least $100,000 is available to pay the new lease payments. The only documents accepted by lenders to verify cash flow are tax returns, financial statements prepared by CPAs and business bank statements.


By Paul Bosley. He has worked in the fitness industry for over 40 years both as an owner-operator and as a financing source. Paul is the owner of and can be reached by calling 800.788.3884 or by emailing