Small Business Equipment Lease
Small businesses and new businesses often find it very difficult to obtain financing. Private loans are not easily qualified for, and federal loans have precise requirements not easily met and are not widely available.
When it comes to financing new equipment, leasing can be the solution.
Leasing Explained
Leasing consists of obtaining an asset which remains the property of the lender but can be used by the borrower. The contract lasts for a certain period of time at the end of which the borrower has the option to buy the asset by paying a lump sum (usually a small percentage of the asset’s value). If he chooses not to do so, the contract ends or it can be renewed by replacing the leased asset with a new one. It’s widely used for cars and business equipment.
Benefits of Leasing Equipment
Leasing equipment has many benefits; it combines the advantages of renting equipment with those of possession by means of loan financing. Furthermore, the main advantage leasing provides is flexibility. Due to its mixed nature, most terms are subject to negotiation.
No Money Down
When buying equipment you need either to put money down or request a loan in order to purchase the equipment. When you lease, you pay monthly installments and get immediate tenure. It is just like if you were renting the equipment only you’ll be able to acquire it if you want to at a later occasion.
Tax Benefits
When you purchase equipment, it adds up to your taxable assets. If you requested a loan in order to pay for it, you can deduct the costs, but the equipment remains your property. When Leasing, you only hold possession of the equipment, it remains property of the lender and thus, you can deduct the monthly payments and it will not add up to your taxable assets.
Flexibility
If the equipment becomes obsolete, you can always request it to be replaced with a new one. Thus, you won’t suffer the consequences of obsolescence. You can have up to date equipment just by paying a monthly fee for it. Once you have no more use of it, disposing of it becomes the lender’s problem and not yours.
Given all the technological changes that occur everyday, chances are that you will make an excellent use of this leasing characteristic. When it comes to starting businesses and businesses in the technological field or technology dependent, leasing is definitely the best financial alternative.
Fast Approval
Since the asset remains property of the lender, leasing doesn’t have many requirements. The contract usually includes insurance policies attached to it so the lender get’s rid of certain risks related to the equipment and concentrates on its concern (financing).
Nevertheless a good credit history contributes a lot to getting a good deal on a leasing transaction. Bad Credit can increase the costs of leasing operations and since leasing is not the cheapest financial option, if you have really bad credit, it might be wise to consider other alternatives first.
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New Financing Source
According to a recent Equipment and Leasing Finance Association report, U.S. businesses leased nearly $600 billion in capital goods.
Hispanic Chamber helps boost businesses
The event will stress credit, nontraditional lending, equipment leasing, Small Business Administration loan guarantees and microlending.
Equipment leasing is your ticket to upgrades
In a struggling economy, leasing allows manufacturers to upgrade existing equipment, acquire it new, or improve it.
| Mary Wise, a professional consultant at http://www.badcreditloanservices.com with twenty years in the financial field, prevents consumers from falling into the hands of fraudulent lenders. In her website you will find more useful tips and interesting financial articles on this and many other related topics. By Mary Wise |
The Benefits Of Equipment Leasing
However you are confronted with the question of whether to buy a brand new one or just opt for equipment leasing?
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Small Business Equipment Financing
Discover the various ways you can finance the purchase of equipment for your business without having to tie up any liquid assets.
Every business requires equipment at some point. Your business may need computers, vehicles, manufacturing machines, factory equipment and is entirely dependent on the type of business you are running.
Imagine the business equipment needs of a simple business like a coffee shop, for example. You’ll need to acquire, in addition to business premises, one or more good quality coffee makers or espresso machines, tables and chairs for your customers, refrigeration units, storage units, a dishwasher and mugs and serving ware. That’s quite a list, and quite an outlay for a new business - all before you open your doors. There are, however, a number of different ways that you can acquire equipment and other assets for your business without having to part with your liquid assets by making payments up front.
Operating Lease
An operating lease allows you to acquire the equipment you need for your business without a large initial outlay. In addition, you get up to 90% of the resale value.
The advantages of an operating lease include:
- lower rental fees
- the ability to use the equipment without owning it
- there is no need to dig into other lines of credit to finance a purchase
- your rental fees may be deductible from taxes as operating expenses
- there are other tax advantages, including avoidance of depreciation
Asset Finance Lease
A finance lease allows you to use the equipment you need without owning it. When the lease ends, you may get a percentage of the resale profit in the form of a rental rebate.
The advantages of a business asset finance lease for your equipment include:
- Low initial expenses
- Easily arranged through many vendors
- Monthly fees are a fixed expense
- Leased equipment is a balance sheet asset
- Maintenance contract is often included as part of the monthly rental fee
- Use of equipment without ownership
- Rental fees may be deducted from taxes as operating expense
- Frees up or preserves other lines of credit for other uses
- A percentage of resale price may be available as a rental rebate
Hire Purchase
Hire purchase represents an excellent way to acquire equipment without paying the entire cost up front. The advantages of hire purchase include:
- immediate use of the equipment that you need
- fixed or variable rates of interest available on loans
- the interest on your commercial loans may be tax allowable
- consistent monthly payments make bookkeeping easier
- ownership of the asset at the end of the payment term
- can often be tailored with payment holidays or stepping payments to allow the equipment to start generating profits
- balance sheet asset
Most manufacturers and suppliers will work with you in many different types of finance and purchase arrangements. Once you know the type of equipment you need, shop around to find out what finance and purchase arrangements are available to you. A trained business consultant may be of use in helping you decide between asset finance and hire options.
Commercial Mortgage and Business Finance
Small Business Equipment Finance - Importance of Trade Finance & Structured Trade Finance.
Borrowing money tough for businesses
Reduced requests for business loans. If a manufacturer isn’t adding to a plant or a small business isn’t buying equipment, then the need for new credit goes down.
Small Business Seeks Short Delay
Given the cost of the equipment and the difficulty getting financing in these hard economic times, a number of small retailers find this hurdle impossible to meet.
Visit http://www.cash4business.co.uk to learn how flexible business asset finance can help you benefit from new assets such as equipment without tieing up valuable working capital in it.
| By Chris Johns |
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