Small Business Equipment Leasing:
Stretch Your Funding As Far As It Will Go

Small business equipment leasing is a strong option for many small businesses, even startup businesses, that need to hold onto working capital. The key to the power of equipment leases is that the lease is secured, much like an auto loan.

Equipment leasing programs provide many benefits to business owners compared to the outright purchase or regular financing of equipment, such as

tax savings,
no down payments,
less hassle,
and minimal risk of the item being obsolete.

Many types of equipment are eligible for equipment leasing, including

Agricultural and food processing equipment
All types of rolling stock, including tractors, trucks and trailers
Manufacturing and production equipment
Aircraft
IT and office equipment
Medical equipment
Specialized research equipment for labs of all kinds

Nor does the equipment have to be new. Used equipment can put under a lease umbrella, as long as you can prove the value of the equipment. Since a lot of business equipment is placed into the secondary market, this isn't an issue for most companies.

Tax Benefit of Small Business Equipment Leasing

Small business equipment leasing allows you to deduct 100% of the amount you pay on the lease each month. This is important because equipment that is financed by banks must be depreciated over a longer period of time with only the interest payment being deductible. For many businesses, this is an important component of tax planning.

No Down Payment Option

The no down payment option is also attractive to most businesses. This no down payment policy will allow your business to finance 100% of the cost. This 100% financing often includes extra expenses like taxes, installation, delivery, and maintenance. By not having to pay money down businesses can hold onto to more cash, a major consideration for many companies.

Small Business Equipment Leasing and Business Plans

Leasing equipment usually isn't as difficult as trying to obtain another form of financing. For equipment purchases under $100,000 you typically will not have to provide financial statements, tax returns, or a business plan. The form you fill out is a simple one page form that is similar to filling out a credit card application. The approval process is also rather quick as compared to a loan which can take days or even weeks before you are finally approved for the financing.

Caveat: However, if you DO present a current, well structured business plan, you will likely get much better terms on your lease. Not all leases are created equal. Get ready for the best deal you can make.

Small Business Equipment Leasing for Start Ups

Unless you are a huge company or an individual tycoon, you will probably need equipment loans to get your business up and running. For new businesses, start-up costs can be daunting even without purchasing special equipment. Loans provide the small business owner with a way to get the equipment he or she needs without tying up vital capital or credit lines.

If you plan on obtaining equipment via a lease, be sure that is accurately reflected in your projections. This is one strong way of demonstrating your financial skill in running your business.

Lease/ Buy Back Option

Let's assume that you already own the equipment. But you need cash. A common scenario is that the leasing company will buy the equipment from you, then lease it to you. At the end of the lease, you will re-purchase it for a stated amount. The leasing company will actually hold title to the equipment until the lease is ended, and you have re-purchased the equipment.

Factors Affecting Your Small Business Equipment Lease

Your Personal Credit. While credit rating is not as critical as with other forms of banking, you will still need reasonably good credit. However, a ding or two on your report may slip by with this type of funding.

Your Company Credit. This is more important than your personal credit. If your company has established a record of paying its bills, you are doing well.

The Aftermarket for the Equipment. If, after the lease is over, you are faced with assuming ownership of the equipment, be prepared ahead of time in knowing what you will do with it. Will you dispose of it, sell it, re-lease it, use it? What are your real options here?

Your Total Company Debt. The lease is considered a debt, like any other loan. If your company doesn't have much debt presently, that is good.

Where to Find Small Business Equipment Leasing Companies

Here's where your bank can really come in handy. If they don't handle it themselves, they can refer you to local companies that do handle it.

Also check your trade organization publications and see who advertises in your industry. Companies familiar with your industry are likely to be more receptive to the leasing project. Return to Top of Small Business Equipment Leasing

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