“There Are Several Equipment Lease Financing Options Available To Small And Medium Sized Businesses”
Equipment leasing has become a very common and important financing vehicle for small and medium sized businesses.
This type of financing is very flexible and can be used for just about any type of asset ranging from office furniture and computers to heavy duty construction equipment and everything in between.
From the lease structure point of view, there are basically two types of leases namely a capital lease and an operating lease.
A capital lease functions much like a loan in terms of the debt servicing requirements and how the financing facility is reported for accounting and tax purposes.
Basically a capital lease requires the borrower or lessee to purchase the asset for a nominal price at the end of the lease term.
With the operating lease, the lessee does not have to purchase the asset at the end of the lease term, but may elect to do so under different purchase options.
An operating lease can be structured in a number of different ways to provide cash flow and taxation advantages to the lessee.
Outside of lease structure, the next aspect of lease financing options would relate to the financing companies that provide financing.
Both bank and non bank lenders can provide equipment lease financing programs.
For financing amounts under $200,000, there are a wide variety of what we refer to as small ticket leasing companies that provide lease financing to businesses either on a regional or national basis.
Within the small ticket group are different credit and asset type focuses among leasing companies.
There tends to be more “A” credit options available, but there can be “B” and “C” credit options available to you as well depending on the asset, your location, and financial profile.
For transactions greater than $200,000, there is another class of financing companies that focus in on larger transaction size. Some will not consider deals under $500,000.
The cost of different leasing options, like any type of financing, is a function of risk.
So the actual financing cost will be directly impacted by the industry you are in, the type of asset being leased, the location of you business, and your financial and credit profile.
As a result, leasing costs can vary considerably from one deal to the next. In order to get the best potential deal, there can be a considerable amount of option comparison required if you’re not familiar with which financing companies would be most relevant to any one particular deal or financing scenario.
One of the best ways to quickly assess the most relevant options available to you is to work directly with an equipment leasing specialist who can help you zero in on the specific financing companies that would be most interested in providing for your requirements at the rates and terms you’re looking for.