Are you wondering exactly what an equipment leasing professional is? What do they do and how do they benefit small businesses? Here’s what you need to know about this important job, and whether or not you would benefit from forming a partnership with an equipment leasing specialist.

What do Equipment Leasing Professionals Do?

Equipment leasing professionals purchase office equipment on your behalf and lease it back to you at a flat monthly rate, freeing up cash for use toward other expenses like inventory and payroll. The goal is to help businesses have access to the latest capital equipment at a lower monthly cost than buying. When the lease term is over, the business may choose to purchase the equipment at fair market value (or a predetermined price), continue leasing it, return it, or lease new equipment.

Though businesses of every size and age lease office equipment, it’s particularly useful to smaller start-ups because smaller leases ($100,000 or less of equipment) can often be feasible with co-owners’ or partners’ personal credit.

Currently there is a lot of money flowing into leasing companies, and many are responding with more competitive monthly rates for clients. Applying for a smaller lease is similar to applying for a credit card. Leases of over $100,000 worth of equipment require a more thorough credit analysis as well as detailed financial information from the business.

Why Businesses Lease Capital Equipment

A capital lease protects companies from technology changes that could make current equipment obsolete in a few years and offers a fixed monthly payment, which blunts the impact of inflation. Additionally, it ensures that a company doesn’t have major amounts of capital tied up in equipment.

Capital leases generally last from one to five years, ensuring that the lessee isn’t stuck with outdated equipment that’s hard to sell (even at a loss). With a lease, a company can enjoy the benefits of expensive equipment, without the huge expense of buying. If, however, the leased equipment proves to be of great use, the company may choose to purchase it outright at the end of the lease.

Advantages of Equipment Leasing

There are other advantages of equipment leasing, in addition to not tying up capital and having the option to purchase when the lease is up. There is no down payment as there would be with a bank loan to purchase equipment. There is, however, usually a security deposit of two months’ payments collected up front.

New and small businesses like knowing what their monthly payment will be every month, and even before leasing, there are online lease payment calculators that can help businesses get an idea of what their monthly equipment leasing expense will be.

All costs associated with acquiring capital can be rolled into the lease pricing. This would include costs like sales tax and installation. Also, depending on the terms of the lease, monthly payments may be tax deductable over the term of the lease.

How the Equipment Leasing Process Works

Once you have identified an equipment leasing specialist to work with, you select the equipment you want and finalize a price with the vendor. Your leasing specialist will help you determine the best lease term and structure. At that point, you complete an application with the leasing specialist, and once you’re approved, they will document the transaction and issue the purchase order to the vendor.

When you lease capital equipment, you have to carry insurance coverage for general liability, loss, theft, and fire. The exact type of coverage you need will be spelled out in the terms of the lease agreement.

What to Do if this Sounds Like a Good Option for Your Business

You can find an equipment leasing professional for just about any business equipment you could need. Many equipment vendors offer direct referrals to leasing specialists with which they have done business. You are wise to get more than one quote, and this is normally not a problem, because many vendors work with multiple leasing companies. You could also ask a business associate or a trusted local business owner for a referral to an equipment leasing specialist.

Before signing anything, you should know whether you’re speaking with a broker who structures the deals and gets them financed through leasing companies or whether he or she actually works for the leasing company. Brokers in some cases can find you savings that more than offset the broker fees, but that is not always the case.

Photo Credit: Sfluehnsdorf