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.
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Small Business Equipment Leasing
