One of the first, and most important, steps in starting a business is deciding whether to buy or lease for small business. If you decide to lease, the next step, also very important, is finding small business lease financing. Business lease financing can be used for a number of purposes, including for space or equipment. For either, it provides an efficient way to get your company up and running. Rather than wait to have the money for buildings or equipment in hand, you can lease the existing tangibles and launch your enterprise.

There are a variety of sources for lease financing for small businesses. The best one for your small business might depend on elements such as what is being leased, special arrangements your firm might need and what other services you need from the lender. As your team learns the lease financing for small businesses basics, consider the following guidelines:

1. Opt for leasing for small business.

2. Search the Internet for small business lease financing providers.

3. Decide on a small business equipment financing option.

Action Steps
The best contacts and resources to help you get it done

Choose lease financing for small business

In almost all business situations you need equipment to get your business going, even if it is just office machines. Once you find the right equipment, you don't have to wait years while you accumulate the funding to purchase it. Use small business equipment leasing to open your doors sooner.

I recommend: Read the recommendations on equipment leasing for small business at BusinessTown.com. It specifies the advantages clearly. Review the information about equipment financing at iBank. Get your feet wet with its step-by-step introduction to the loan process.

Search online for small business leasing financiers

Your business has several options for small business equipment financing. Most banks offer one or more equipment financing opportunities. Equipment makers and suppliers also provide funding options, whether your business needs office equipment or heavy machinery. Weigh both sources among your lease financing options.

I recommend: Consider one of the business leasing options from Bank of America. The first two loans can be used to lease equipment; the third for business vehicles. Find the right lease for your office equipment from Hewlett Packard. It offers one-stop shopping or select equipment for lease.

Consider a small business equipment financing specialist

The market for small business equipment financing is large, so there are many businesses that specialize in it. Because they focus on equipment leasing, they are often familiar with equipment needs and can even recommend equipment suppliers. Consult several of these companies to complete your understanding of lease financing for small businesses basics.

I recommend: Check into the lease financing options at Madison Equipment Financing. It offers capital lease, operating lease and other choices. Lease financing from Capital Funds Leasing helps your business secure the equipment, manage cash flow and build collateral.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you choose a tax, or true, lease as your option for equipment leasing for small business, note that your business will have use of the commercial equipment for the term of the lease but will not have legal ownership of that equipment. You will, however, pay only for the use of the equipment. It is an excellent option if technological changes dictate frequent equipment changes, and monthly payments are relatively low.
• •  Speaking of tax, note that there are tax implications, and in many cases, tax advantages to lease financing for small businesses. Be sure to check with your accountant.

Need to equip your start-up business with office machines, furniture, vehicles or computer equipment? Business equipment leasing can spare you the burden of debt that comes with traditional purchases and loans. In addition, lease financing can offer attractive payment options structured to help start-ups make it through those tough first years in business. Even better, equipment financing terms can include the ability to upgrade your equipment so your company will always remain on the cutting edge rather than being saddled with outdated equipment.

When shopping for small business equipment financing, consider the following:

1. Choosing the right equipment financing company for your industry.
2. Using TRAC leasing for equipment financing for business vehicles.
3. Deciding between an operating lease and a capital lease for small business equipment financing.
4. Lease financing terms, such as fair market value versus dollar out.
5. Equipment financing lease payment options that support your business cycle.

Action Steps
The best contacts and resources to help you get it done

Choosing the right business equipment financing company

Look for a small business equipment financing company that specializes in your industry, one that understands its needs and cycles and offers financing for its specialized equipment. While leasing general office machines and furniture is best done locally, the more specialized the equipment, the more expertise you need in a lease financing company.

I recommend: Leasing computers and IT equipment allows you to stay abreast of current technology. Dell’s Quick Lease program offers flexible payments and technology rotation for computers and related equipment to help small businesses stay abreast of technology. HP Financial Services offers a complete line of leasing and financial lifecycle management services. All Options Equipment Leasing offers comparative quotes from multiple lease financing companies for computer equipment. While Keystone Leasing prefers to deal with businesses that are at least two years old, they encourage start-up medical practices to apply. The National Association of Doctors has an equipment leasing program that specializes in medical equipment. Restaurant equipment is commonly leased and many finance companies serve this market. LeaseSource offers leases on food service equipment. Bizoodle matches up small business owners with equipment lease financing resources.

Use TRAC leasing for equipment financing for business vehicles

When leasing business trucks and trailers ask about a TRAC (terminal rent adjustment clause) lease, in which you hold title while the small business equipment financing company holds a lien. TRACs, which apply to over-the-road business vehicles, such as trucks and trailers, afford you the option of buying the vehicle at a predetermined price at the end of the lease.

I recommend: Biz Quoter offers comparative quotes from multiple leasing companies. First Capital Equipment Leasing Corp. offers lease financing on commercial vehicles with TRAC options.

Operating leases versus capital leases for small business equipment financing

Business equipment financing leases are either operating leases or capital leases. Operating leases allow you to use the equipment risk free and return it at the end of the lease term with no option to buy. Capital leases allow you to claim depreciation on the equipment while deducting the interest on the lease and allow you to buy the equipment at the end of the lease.

I recommend: Nationwide Funding offers operating and capital lease financing solutions.

Fair market value versus dollar out in business equipment leasing

If your intent in lease financing is to eventually own the leased equipment, you will have a capital lease, which is financed as dollar out, meaning that at the end of the lease you can either return the equipment or purchase it for a nominal amount. If you have an operating lease you will use fair market value financing, which offers a lower monthly payment than dollar out. At the end of the lease period you can either purchase the asset at current fair market value, extend the lease on a month-to-month basis, return the equipment or renew the lease for a fixed period.

I recommend: LeaseSource offers both fair market value and dollar out leases for business equipment.

Look for equipment financing lease payment options that support your business cycle

While monthly payments are the norm, many small business equipment financing companies offer alternative payment schemes that accommodate new or seasonally driven businesses. A skip lease allows seasonal businesses to skip payments in the off-season without penalty. A step-up lease is structured to have low payments in the beginning, rising as the business grows. The 60-to-90 day deferred lease allows the lessee to skip payments for the first two to three month to build capital and then begin regular monthly payments.

I recommend: Equipment Leasing Depot represents companies that offer flexible lease payment plans for businesses in seasonal industries such as agriculture, amusement and construction as well as industrial, manufacturing, medical and transportation.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Before you sign a small business equipment financing lease, decide whether you want the option to buy the equipment at the end of the lease term.
• •  If your company's competitiveness depends on state-of-the-art equipment, shop for an equipment financing lease that allows you to trade up.
• •  Always consider the tax implications of lease financing before signing a contract.

If you work within a financial institution that provides small business leasing, or if you want to, you need to get training to ensure that the process goes smoothly. Lease financing for small businesses involves providing a company with funding in order to cover their equipment costs.

A small business leasing company will need to train their staff in order to present different leasing options and determine the company’s financing eligibility. Bank education and finance courses can assist in lease financing for small businesses education and training.

1. Take online small business banking courses. These courses will look in depth at products for small businesses, such as lease financing.

2. Participate in on site training for equipment leasing for small business. Consider seminars or live instruction educational courses.

3. Attend conference events in order to stay current in the industry. Conferences can let you know issues that can affect your small business lease financing branch.

Action Steps
The best contacts and resources to help you get it done

Get free information on lease financing for small business

Online information is easy to find and free. From these resources, gather small business equipment leasing details, uses and qualifications required.

I recommend: BusinessFinance.com provides information on small business lending. Find more free small business equipment leasing information at iBank.

Consider training for small business leasing franchises

Owning your own small business equipment financing franchise could be the opportunity you've been waiting for.

I recommend: Canyon Leasing will train you to start your own small business equipment leasing company. Wirth Business Credit was named one a Top 100 New Franchise from Franchise Market Magazine. They specialize in training for small business leases for equipment.

Get training from small business equipment leasing providers and associations

Training for small business leasing is an ongoing process. Lenders need to stay on top of issues that can affect the industry during the ever changing economic climate. By training with your employer, future employer or a lending association, you have a customized education that will be more beneficial to your career than a generic finance class.

I recommend: Taycor Financing, a leading small business equipment finance company, provides a 3-month training program for its employees. The Equipment Leasing and Finance Association (ELFA) sponsors continuing professional education courses for business leasing.

Intern for small business leasing providers

Get hands-on training with loan officer internships.

I recommend: Tri-State University offers internship opportunities for many finance jobs, including commercial banking loan officers. Davis School District also has available loan officer internships for those pursing careers in small business equipment leasing.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you have a large group to train in lease financing for small businesses, it may prove cost effective to bring in an instructor or professional to lead a seminar on the topic.

Lease financing for small businesses can make a lot of sense because it can allow an owner to acquire all the equipment or assets needed without having to tie up a huge amount of cash. In most cases, a major expense will be equipment and you will want to brush up on the various companies that offer assistance with leasing options. In many cases there is a wide variety of choices, so these terms can help you begin your process.

Action Steps
The best contacts and resources to help you get it done

Line of credit

A line of credit is money that is offered to a small business and can be either cash, overdraft protection or loan. Once it is established, it can be easily tapped if there is a need for additional funds. Interest is paid on the money only when it is actually needed. Firms that offer lease financing for small businesses will often set up a line of credit to make purchasing easier for the owner.

I recommend: Go to CreditorWeb for more information.

Depreciation

Depreciation is a term used to describe how the cost of an asset is spread out over the span of several years. Lease financing often ameliorates depreciation by allowing the small business owner to return the asset when it has depreciated completely so they can then lease a new one.

I recommend: InvestorWords.com has a brief definition of this term.

Fair market value

Fair market value (FMV) is an estimate of what a buyer is willing to pay a seller for an asset. Lease financing incorporates FMV into the calculations for an asset if the business owner decides to return the asset to the firm.

I recommend: HJ Ventures International provides a discussion on this topic.

Total cost of ownership

Total cost of ownership (TCO) is an estimate of the cost of owning an asset from the time it is purchased to the time it is sold. Lease financing firms build in an estimate of the TCO for a piece of equipment or asset when estimating how much the asset should bring in lease value.

I recommend: See TechTarget for a description of this term.

Revolving credit

Revolving credit is a type of credit such as a credit card and which does not have a predetermined number of payments. Leasing finance firms often offer revolving credit terms to companies to help them with liquidity for their day-today operations.

I recommend: Farlex does a good job of explaining this.

Financial life cycle management

Financial life cycle management is offered by some leasing firms to small businesses and helps them keep track of their equipment and manage it throughout its life cycle.

I recommend: Hewlett-Packard Development Company gives a good overview of how they help small businesses manage this process.