Financing Business-Critical Equipment
Almost every Small business finds itself in need of equipment at some point. Whether you’re a doctor with an independent practice, self-employed as an accountant, or are in the planning stages of going into business for yourself in any number of industries, you’ll likely need some type of equipment for your business to operate. It can be as expensive and complicated as an x-ray machine or as standard as an office computer. Whatever you need in order for your business to work, you’ll need to find a way to pay for it.
Small business equipment leasing loans are available for business owners who need to finance an equipment purchase but who doesn’t want to use money out of pocket. Leasing equipment, as opposed to buying it outright, allows you to have cash available for other purchases, payroll, or for any unplanned expenses.
While leasing equipment isn’t a business loan, the equipment is purchased and owned by a lender who, in turn, rents the equipment to a business. It’s very similar in concept to leasing a vehicle. The lease agreement between a business and a lender is usually arranged at a flat monthly rate over a set number of months.
When the lease period ends, the business would usually have the following options: buying the equipment at either the fair market value or an amount agreed to with the lender, extending the equipment leasing loan for another term, leasing newer equipment instead, or returning the leased items to the lender. If there is any chance you will want to buy the equipment at the end of the lease, it is always wise to negotiate the buyout price during initial contract discussions. If you wait until the end of the lease period, you will no longer be in the power negotiating position.
Benefits of Equipment Leasing
- Your business gets the equipment it needs without you paying the full cost upfront.
- You’re better able to budget with equipment leasing since you have regular, set payments.
- A small business equipment lease is generally easier to get than a small business loan.
- If you have an available business line of credit but lease equipment instead of using the available credit, you keep that line of credit available for working capital.
- You may be able to deduct a small business equipment lease as an expense, meaning savings for your business come tax time.
- If you are leasing machinery or devices that age quickly (think of computer and telephone systems), equipment leasing for your start-up business gives you the ability to upgrade your equipment once the term is up.
Disadvantages of Equipment Leasing
- If you have a startup business, you may be required to use your personal credit in order to secure a small business equipment lease, this means that if you don’t make lease payments on time the lender can come after you personally for the money.
- Leasing the items, you need will often cost you more over time than buying the equipment up front.
- Leasing means a commitment to keeping that equipment for a certain period of time unless you are willing to pay the costs associated with breaking the lease, which can often be paying the remaining lease payments even if you are no longer using the equipment.
Additional considerations include knowing whether you are dealing with a broker or the equipment vendor or authorized seller, making sure that the equipment leasing company you’ll do business with has been in operation for a number of years and that the lease company comes well-recommended, and paying careful attention to the lease terms. You also may be responsible for insurance coverage in the event of damage to the equipment, as well as any needed repairs, and may even be responsible for personal property tax. Always read equipment lease loan terms and disclosures very carefully before signing any contracts. If you have an attorney that you use for business matters, it can be very beneficial to have them read over the lease contracts for you.
Is A Small Business Equipment Lease Right For Your Business?
Whether or not to lease or own your equipment can depend on several factors, particularly your business’s financial situation. To determine if an equipment leasing loan is right for your company, make sure to speak with an expert. AmONE’s knowledgeable and experienced financial search specialists are available toll-free at 888-401-0330 to answer your business financing questions. Our free service identifies the highly rated small business financing solutions available by using the experience of business owners like you. Get started by either completing our short small business loan form or by calling us. You are never under any cost or obligation.
