HOW CAN A SMALL BUSINESS SECURE AN EQUIPMENT LEASE?
Businesses can acquire equipment without purchasing it by leasing it. A small business might not have enough cash on hand to finance a necessary equipment lease. When this occurs, there are number of options small businesses have to obtain financing or lower rental costs.
You'll learn about these options and how to apply for an equipment lease in this article.
OPTIONS TO SECURE AN EQUIPMENT LEASE
1. Banks and Firms Affiliated With Banks: Banks may extend credit to a business to help with a lease for expensive equipment. They may be difficult to find, but once found, they provide distinct advantages, such as lower costs and better customer service than companies that are not primarily involved in financing.
2. Brokers/Packagers: represent a minor portion of the leasing market. These brokers, like real estate or mortgage brokers, charge a fee to act as an intermediary between the lessee and lessor.
3. Equipment Dealers/Distributors: Dealers and distributors frequently own subsidiary companies that also offer leasing services. They can help you obtain financing through an independent leasing company.
4. Leasing Companies: To meet the growing demand for leased equipment, an increasing number of leasing companies have emerged. Because different leasing companies provide different services, terms, and product quality, a small business owner should generally approach a few companies to evaluate the terms and equipment lease agreement that each one provides. Leasing companies are classified into two types:
Independent leasing companies: They vary in size and scope, providing business owners with numerous financing options.
Captive leasing companies: These are usually subsidiaries of equipment manufacturers or other companies.
HOW TO APPLY FOR EQUIPMENT LEASING
1. Do Some Research On The Equipment You Want To Lease
First and foremost, you should conduct extensive research on the piece of equipment you intend to lease. Have a good idea of how much the piece of equipment will cost, how much maintenance it will require, and you should be able to get quotes from a few different vendors ahead of time. You'll need to discuss this information with various equipment leasing companies during the application process, so having this step completed before you begin applying is beneficial.
2. Assess The Qualifications Of Your Business
The equipment leasing company you work with, like any other form of debt-based financing, will evaluate your business credentials before deciding whether or not to work with you. However, before exploring your options and filling out applications, it's critical to get a sense of where you stand. Although each lender and equipment financing company will have their own requirements, in general, you should consider your personal credit score, time in business, and annual revenue, as these are three of the most common qualifications used to evaluate your business's eligibility.
3. Evaluate The Best Equipment Leasing Companies
You should look into equipment leasing companies. Banks and online lenders are among the financial institutions that provide equipment leasing. Furthermore, some equipment manufacturers and dealers provide equipment leasing. With this in mind, it's critical to find a reputable equipment lessor who also offers a leasing program that you can qualify for. When comparing various providers, it can be beneficial to review their website, speak with representatives, and read online reviews from previous customers.
4. Gather All Of Your Documents and Submit Your Application
You're ready to start your application once you've decided which equipment leasing company (or companies) you'd like to apply to. Each lender or company will have its own application process, but the majority will provide an online-based, streamlined application system. In general, you should expect to provide basic information about yourself, your company, and any other business owners. Documentation such as bank statements, tax returns, financial statements, and an equipment quote may also be requested.
5. Obtain Approval And Go Over The Lease
After submitting your equipment leasing application, you should hear back from the lender or leasing company. You will then receive a draft of the leasing agreement for your review. Before signing, make sure you understand the terms, fees, and payment system and, of course, compare multiple offers if you have them. You could also hire a business attorney to go over the lease with you.
6. Sign The Lease And Collect Your Money
After you've reviewed the lease, it's time to sign it and return it to the equipment leasing company. They'll handle the closing process and notify you once the lease is signed. The funds will then be transferred to you or sent directly to the manufacturer for the purchase of your equipment, depending on the terms of your lease.
If you don't want to take out a loan, depending on your equipment needs, leasing may be your best option for retaining capital. However, keep in mind that as the lessee, you have certain obligations under the lease. You must keep the equipment in working order. It may need to be serviced on a regular basis to ensure its efficiency. If you do not meet the criteria outlined in your lease agreement, you may be charged fees at the end of the term.
When creating an equipment lease, working with an experienced lawyer can help ensure that all necessary terms are in place to get your business what it needs.