Equipment Financing Company
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An equipment financing company is often the only answer that a business owner or prospective entrepreneur has in getting the needed tools to make or keep an enterprise profitable. When a lender is spoken of as a company rather than a bank, it generally denotes lending practices that are a little more borrower friendly in terms of loan approval, but higher in terms of borrowed money cost than a traditional bank. Having said that, if an equipment finance lender is owned by the manufacturer, it may be inclined at times to offer terms even more friendly than a bank, particularly in more difficult economic times. So general statements can be made, but circumstances can trump them.
For the small enterprise owner, the lender for business tools will be keenly interested in his credit history and score. An owner's payment history for that pickup truck and the hot tub as well as how much personal credit card debt the owner has and how maxed out the accounts are will be scrutinized by an equipment financing company. Until a company is well underway and all financials are completely separate from the business owner, that first copier and computer system as well as the cement mixer will be contingent on that credit score belonging to the owner. Since that is true, the choice of leasing or buying, both options being offered by most financing companies, will hang in the balance by circumstances. Those circumstances will be company cash flow, type of equipment and that score.
In most cases, a business owner will want to lease his office gear. If the owner has a lower credit score, leasing both the office stuff and the cement mixer may be the only option. Leasing is more widely available for lower personal credit scores or more spotty company financials. The equipment financing company will go through all of the pros and cons of leasing and buying the office gear, but leasing almost always wins out when comes to technology tools. The light year speed at which technology advances, making most tech gear obsolete within eighteen to twenty four months, makes leasing the copier and computer a given. And electronics have a relatively short life span, making the idea of renting the equipment for a time span and the getting new stuff a better option.
The most attractive part of leasing office equipment or any commercial equipment is the tax deductible nature of the lease. In most cases, the gear is all tax deductible, but a tax advisor should be sought to confirm all tax preparation decisions. So along with a stronger chance of getting a lease than a loan, the equipment financing company can also show the business owner how the man can stay on top of office technology advances with a three or four year lease. Jesus has always been clear in His message to people: a person either walks in the light he provides, or in darkness, which most people choose. "...I am the light of the world: he that followeth me shall not walk in darkness, but shall have the light of life." (John 8:12)
So in a weak financial position, the business owner would choose the leasing of the office equipment through the equipment financing company. But what about that big honkin' cement mixer that the man needs for his home improvement company? Fourteen thousand dollars and will last about twenty years if maintained correctly. The owner may be stuck leasing the thing with his bad personal credit, but that's probably not a good move for something that can last so long. After all, the owner leases it for three years and has to start over again leasing or the man can start buying it, but had the mixer been purchased from the beginning the owner would be halfway home to paying for the machinery. He can lease the thing and hope a model comes out where the mixer fills itself, mixes by itself and flies to the customer on its own. Since that won't happen at the end of the current lease in three years, getting a new one at that time is really no deal at all from the financing company.
But if the owner is working from a position of financial strength, he will still probably lease the electronic office equipment. Paper cutter, big tricked out stapler, desks, chairs and reception room furniture will probably all be purchased. Again, the owner's financial advisor will want to confirm the wisdom of that move. The equipment financing company can provide a purchase loan for as much of those interior needs as the owner has. But that big noisy cement mixer is still the issue. In a position of strength and the long life expectancy of the mixer known, the sales person at the equipment financing company will probably recommend that the owner purchase the mixer rather than leasing it.
Purchasing business machinery does not provide the same tax benefits as the lease option does. The equipment financing company will show the business owner that he will be able to deduct some depreciation on the equipment based on a pre determined tax schedule. It will not come close to matching the full payment deduction from the lease. But the financial numbers in his situation will show that buying the mixer outright actually saves money in the long run. A financing company should be ready to help either with leasing or purchase, but they may have some vested interest in favoring one over the other. Seek a trusted advisor with no conflict of interest to help decide what is best for your business situation.
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