Idea Cafe's "Equipment Leasing"

Equipment Financing (Leasing)

Table of Contents
1. What is Equipment Leasing or Equipment Financing?
2. Who is This Good For?
3. When is This the Best Choice for Me?
4. When is This Not Advised?
5. Tips for Getting Approved.
6. Ingredients You'll Need on Hand.
7. Watch Out For...

1. What is Equipment Leasing or Equipment Financing?
Instead of buying equipment, you lease it -- you contract to pay a monthly rental fee to use it. Equipment leasing is available for all types of equipment from major manufacturing equipment to smaller equipment, such as computers. Equipment leasing financing is available from banks, finance companies and from equipment manufacturers or retailers.
2. Who is This Good For?

Companies that have to make major investments in equipment that don't want to tie up large sums of money;
Companies that need to change their equipment frequently, so they don't have capital tied up in soon-to-be-obsolete equipment;
Companies with good cash flow that can easily afford the monthly payments but don't have the money to lay out for the purchase of equipment

3. When is This the Best Choice for Me

When you need equipment to do the work you have orders for, but you don't have the money to purchase it;
When your bank is dragging its feet coming through with a loan for purchase of equipment, and you can get it faster by leasing;
When you've got a pretty good credit history;

When there are tax benefits to leasing.

4. When is This Not Advised?
When you can afford to pay cash;
When the cost of purchasing the equipment is far less than the cost of leasing, and the amount of money is not major, so that you could put it on a line of credit;
When you are undertaking a major financial obligation without a good sense of how it will be paid off;
When you have a poor credit history and you are likely to be turned down; the bank or company granting you the lease will do a credit check and their inquiry will go on your credit record;
When there are tax benefits to purchasing rather than leasing.

5. Tips for Getting Approved

Shop carefully for the equipment you need; don't lease one type of equipment rather than another just because the lease is easier to get; make certain it's the right equipment for the job;
Consult your CPA about the tax implications of leasing to determine whether it is better to buy or lease;
If you have orders or contracts for work to be performed on the equipment and that show you will be able to pay off the lease, bring them along to show the potential lessor;
First negotiate the cash sales price, so you'll know the value of the equipment if you were to buy it rather than lease it; then negotiate on both the total price of the equipment and the interest rates to be charged;
Consider going to your bank or regular lender for the lease; they may give you a better interest rate than the equipment manufacturer or vendor.

6. Ingredients You'll Need on Hand

The lessor will thoroughly examine your credit history;
You may have to pledge additional collateral to secure the equipment; after all they are making you a loan;
Lessors may want to see a basic financial package or personal tax returns.

7. Watch Out For...

If you don't own the equipment, you can't use it as collateral against a loan in the future.
Interest rates can be very high. Negotiate the rate.
Overly long contracts. Will you be stuck with the equipment even after it's obsolete or if your work pattern change? Examine the contract to see if you can get out of it if your needs change.
What happens if you want to (or need to) skip a payment every once in awhile? Unless you've got such possibilities covered in the contract, your equipment may be repossessed.
Remember that a lease is a long-term contract, so it's hard to get out of early.

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