Many businesses find that they need to set aside funds for purchasing equipment as they grow. However, it can be difficult to make such allowances, especially in these economic times. Why put the operating budget in the red by taking on extra financing, when it is much more advantageous to secure one of the many leasing programs offered by equipment brokers to get the equipment you need today?
Financing vs. Leasing
For established businesses, those that have been operating successfully for at least two years, getting financing to make equipment purchases can be a difficult prospect to face. With rising interest rates, banks and loan companies can require additional collateral to be signed over in order to secure the loan, or even enforce such loans on a short-term note that will have to be paid off with fees in less time than the business may be able to afford.
Leasing programs, on the other hand, are much more flexible and can be customized to the business’ exact needs. Not all equipment purchases are meant to be for the long term, and may only be needed for a limited amount of time. Financing through loan agencies under these circumstances would be less than efficient, because once the loan is paid, you are still the owner of the equipment, and reselling it once it is no longer needed will not pay back the initial investment. With equipment leasing, you can easily add in clauses that cover the return of unneeded equipment, sometimes at a financial bonus to your business.
Types of Equipment Leasing Available
For those seeking to only gain the use of needed equipment in the short term, there are two programs that can be used to their advantage. The first, known as an operating lease, allows a business to lease needed equipment for the exact length of time that they need it, at an affordable rate. Once it is no longer needed, it can be easily returned back to the leasing agent for a small fee. The second, known as a master lease, allows the business to try out equipment they were thinking of purchasing for a specified period of time, without any transference of ownership. At the end of the initial lease, they have the option to extend that lease, without having to renegotiate.
For those interested in actually purchasing the equipment but do not want to tie up operating capital in commercial financing, the capital lease is probably the best leasing option available. The equipment is purchased through a leasing agreement with affordable monthly payments and at the end of the agreement, one final payment secures the property and transfers ownership rights. However, for the purposes of taxes, the equipment is considered to have already been purchased during that fiscal year and any tax breaks for making such a purchase can be applied, even though the final payment on the equipment may be a year or more away.
A Lease That Actually Pays You Money
For business owners looking to the future, they may have already earmarked equipment that they would like to sell but cannot do so until operations surrounding them have been concluded. This would normally mean taking out a loan in order to finance the startup of the future operation, including purchasing new equipment. With a sale and lease back type of leasing programs, business owners can sell future unwanted equipment to a broker, for a negotiated full purchase price, and then temporarily lease it back at an affordable rate. This gives them the use of the equipment while they need it, plus the cash flow they need to start the new operation. At the end of the term, the broker takes possession of the sold equipment.