Leasing Equipment

Don't have the cash for important gear? Even if you do, you might be better off leasing

Equipment leasing is a great way to get the business gear that your company needs to grow. What can you lease? Just about any hard asset with a four-digit-or-more price tag, from computers to furniture to heavy machinery. Typical leases are between 24 and 48 months.

Leasing provides many benefits, but the most important is better cash flow for your company, since leasing typically carries little in the way of up-front costs. Leasing is easier and faster than bank financing, and it allows you to have the latest equipment. The downside: it's more expensive than bank financing in the long run, you have to pay even if you stop using the equipment, and you'll probably need to guarantee the lease payments personally.

The main types of leases are:

1. A capital (or finance) lease, which is like a loan. It spans the entire expected life of the equipment. A capital lease is great if you plan to keep the equipment at the end of the lease. You can also treat the gear as a depreciable asset.
2. An operating (or true) lease, which is more like a rental contract. It's shorter than the life of the equipment and generally will tie up less of your cash. Payments are often tax deductible.
3. A skip lease allows you to skip payments during slow months, which is ideal for seasonal businesses.

 

Contact manufacturers directly

Many large manufacturers provide leasing options or referrals to interested companies. You can usually find this information on their Web sites by searching for "leasing."
Try: See the Web sites for Toshiba and Hewlett Packard for examples of manufacturers with leasing options.

Find leasing companies via online directories

Even if manufacturers have their own leasing options, it also makes sense to get quotes from independent sources.
Try: You can find a list of equipment-leasing companies at PrintCities and request rate quotes through the Equipment Leasing Association (ELA).

Consider the big names as well

A number of the business-finance behemoths have leasing arms. If you already do business with a large financial institution, it's worth asking if they're involved in equipment leasing as well.
Try: For examples of big companies that also do equipment leasing, check out GE Capital Corp and JPMorgan Chase Bank.

 

• Shop around for vendors and types of leases to see which best meets your needs.
• Discuss the tax implications of the various lease types with your accountant.
• Ask your lease company for four to five references, preferably companies similar to yours in size and sector.
• Check any prospective vendors out with the Better Business Bureau to see if there have been any complaints.

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