Commercial Equipment Leasing
For businesses that are interested in commercial equipment leasing, there are both opportunities and drawbacks that need to be considered. The advantages of leasing expensive equipment can be many. Finding enough money to purchase needed machinery can be very difficult for companies, especially ones that are just starting out. A large bank loan may be available to companies with extremely high credit scores, but the payments can be steep. Available credit will generally be dramatically reduced. A lease agreement might be a better fit for many organization's budgets and bottom lines. Vendors will usually offer clients a wide variety of merchandise and terms. Price points, installation, warranties, and other concerns will frequently be addressed by reputable leasing companies as well. Terms of a basic lease can generally extend over a two to five year period. Once the lease is up, there will be a variety of options available to the client. The lessee may return the machinery to the vendor, or they may purchase it from the vendor. The purchase price will be based upon the residual value of the machinery. However, selecting the source of the lease agreement can be a very crucial decision. Vendors will frequently have their own lease departments and can help clients obtain financing. Traditional banks may also offer lease agreements to clients in good stead with high credit scores. However, these commercial equipment leasing agreements may also cut back on the amount of available credit that a company has at that particular lending institution.
There are many advantages to commercial equipment leasing. These advantages could include added working capital, protection against obsolete machinery, certain tax advantages, avoidance of debt, no down payment, flexibility, and no fluctuating interest rates. Working capital can be a very valuable commodity for start up companies. Borrowing a large sum of money to purchase equipment means that these funds are not available if a business owner needs them for something else. Many types of machinery can become obsolete very quickly in this technological age. If this machinery has been purchased out right, it is company property. A lease can mean that technological updates are much easier to achieve and the business is not repeatedly stuck with machinery that is out of date. If machinery has been leased, it does not represent a large debt and there is no need to raise a hefty down payment to obtain a loan. Leased machinery is not considered a company asset and payments made on the lease come from pre tax funds and not profits, so there are definite tax benefits that are associated with leasing. The structure of a lease agreement can also be tailored to meet the needs of an individual organization. Loans can often carry expensive interest rates. In general, one of the best ways to attain top notch industrial machinery in a way that best meets the needs of companies large or small can be commercial equipment leasing.
There are many types of machinery that can be attained via commercial equipment leasing. Most vendors will have professional sales personnel on hand who will help clients find the kinds of machinery that are best suited to a particular company's needs. A variety of vendor leasing programs may also be available. Towns and municipalities may be eligible for specialized financing as are companies that work within the construction industry. Special leases for technological needs and TRAC leases for vehicles are generally available as well. Whether the client represents a small start up business or a large commercial entity, most vendors will work out a plan that best suits the client's individual situation. If a client expresses a desire to purchase machinery at some point in the future, lease agreements can be drafted that accommodate this desire. In some cases, a company may wish to weigh all options, including the cost of purchasing rather than commercial equipment leasing. Sales personnel can work with a client to decide which option represents the best alternative for them. In some cases, a vendor might offer clients something called a net lease. With a net lease, the client must handle certain expenses such as usage taxes, utilities and maintenance. Large machinery that lasts for years may have extended leases. Some can last for a decade or more.
Within the realm of commercial equipment leasing, a bargain purchase option may also be offered to some clients. This option means that a lessee can choose to purchase the equipment during the life of the lease or when the lease ends. A bargain renewal option allows the client to renew the lease or to re negotiate terms when the original lease ends. Finding financially advantageous ways to gain needed supplies and equipment can help to protect a business from failing. The Bible tells of the strength and protection that is available in the name of the Lord. The name of the Lord is a strong tower: the righteous runneth into it, and is safe. (Proverbs 18:10)
When a commercial equipment leasing contract comes to an end, the residual value of the machinery must be determined. At the beginning of a lease, there are generally assumptions that are made by vendors on what the equipment will be worth when the lease ends. Some merchandise can be refurbished and re used, giving them a greater residual value. Others, such as technology related products may have very little value at the end of a lease. A knowledgeable client will understand the value of any leased products before entering into any end of lease agreements with vendors.
Equipment Leasing ProgramAn equipment leasing program may often be the financing option of choice for many companies that may need to keep the cash flow moving as freely as possible. Of course, there may be an issue as to whether or not renting (leasing) the equipment is best just by the type of gear that is under discussion. Sometimes the entrepreneur just beginning a business might forget or be unaware that leasing is a viable option. But a look at a few principles of the lease vs. buy argument might be helpful. So the first issue is the kind of equipment is under consideration.
Most people understand that electronic equipment such as officer copiers, computers, phone systems and other communication devices have a relatively short life, perhaps as brief as five years. With technology changing almost as fast as some movie stars change spouses, the reality of possessing outmoded equipment is very likely within just a few short years. In some cases, having this out dated equipment might actually hurt one's competitive edge. On the other hand, if a person is buying, say, earthmoving equipment, the technology hasn't changed much in the past fifty years, at least in terms of the physics of it all. Engines have improved and quality has improved but, a bulldozer bought today can and might still be in business twenty years from now. Often an equipment leasing program may not be as useful for this kind of purchase.
Whether or not it's an office copier or a crane, the principles of an equipment leasing program are the same. One of the most popular reasons for leasing anything commercially is because all lease payments are tax deductible when the gear is for business use. Buying a piece of heavy machinery can offer one slightly similar advantage in that part of the depreciation schedule of the equipment can be claimed as a business expense each year. Making the decision regarding a copier or computer will probably be a no brainer; a leasing program will win almost every time. But the bulldozer may be a different issue. A three hundred thousand dollar bulldozer may be depreciated over a ten or fifteen year schedule not giving the same yearly deduction as say, a full lease payment of twenty five hundred dollars per month might do. But when the five year lease is up on the dozer, a new equipment leasing program will have to be crafted on a new dozer.
But that new dozer is not much further advanced than the one just returned. So the lease will have to be on a new dozer at a higher price, or the one being returned can be leased again, or can purchased. Does a person need a new copier about every five years? That would probably be yes, and renting would make a lot of sense. The dozer won't run out of fashion or afoul of technology and the owner may be better off buying the thing. But all these issues on the high end gear can only be done by a financial expert who can compare an equipment leasing program to a purchase plan. Many of us say I am sorry pretty glibly, even to God, but scripture reminds us of the kind of heart we must have with Him. "The sacrifices of God are a broken spirit, and broken and contrite heart; O God, thou wilt not despise." (Psalm 51:17)
Apart from the attractiveness of a full write off payments, the other real desirability of renting has already been hinted at: the ability to stay current with new technology. When someone buys office gear, assuming that he might sell it in a couple of years for new stuff, there is always the burden of having to find a buyer and at a price both can live with. And usually the only way to do that is sell the gear oneself, because trading in gear is like giving the one accepting the trade one of your eardrums. It is always a losing proposition. With an equipment leasing program, when the final lease date has been reached, the provider will come and pick up the stuff and the business relationship is over.
In tougher economic times, when credit is harder to obtain and one must be an absolute angel of credit respectability to even get a whiff of interest from a lender, an equipment leasing program may be the only hope for a business owner to get much needed tools for productivity. For the business owner that is more credit challenged, it becomes very difficult to get money for purchasing equipment outright. And if a loan is approved, it will come with a much higher interest rate. The conditions for approving a leasing deal can be much different, and less stringent than purchasing. If the decision is to lease, then it might be wise to look for an equipment leasing program broker.
Finding a leasing broker can be as easy as looking online. Brokers do not charge their customers for their services. Rather, they are paid by the leasing companies for sending them the business. When a broker meets a client, he will get a profile of the customer's financial standing, and then find a lease company that will work with the customer to get an agreement completed. Making the decision to lease may be quite simple for a number of financial decisions, but for the large tools for business, consult a financial advisor who has no personal interest in whether purchasing or leasing is chosen.