Equipment Leasing FAQ
|What types of equipment can be leased?Almost any type of new or used equipment can be leased. Leasing program availability can be impacted by leasing company policies related to certain industries, certain regional areas or jurisdictions, and the age used equipment being considered just to name a few variables.
What is the cost of financing for an equipment lease?
The implicit cost of financing is determined on a case by case basis and is established by the leasing company based on a number of factors including the type of equipment, credit rating of the business and potentially the business owners, time in business and financial performance to date. Different lenders will also focus on different credit profiles, so the goal is to focus on the leasing companies that best fit your requirements and profile so that the lowest possible rates can be secured.
Are leasing rates competitive with bank loan rates?
First of all bank equipment loans are typically only available for “A” credit profiles and/or equipment purchases that are at least partially insured for loss by the government. For “A” credit applicants, leasing rates can be higher or lower than bank rates at any given point in time as bank loans are based off the prime lending rate and leasing rates tend to be based on the long term bond rate.
What type of equipment lease terms are available?
For most lease approvals, terms are available from 12 months to 66 months. For approvals that support more challenging credit background and equipment types, the available lease terms can be reduced to 24 and 36 month maximums.
Is it possible to purchase equipment from a private party and still get it leased?
Yes, it is possible to complete a private purchase and still receive lease financing. In order to do so, the leasing company will perform a background check on the seller and check for any security registrations to make sure that 1) the seller had a right to sell the asset, and 2) that the asset can be provided with a free and clear title.
Are there any prepayment penalties?
The prepayment process will vary among equipment leasing companies. Most leasing companies will not have a calculated prepayment penalty for early repayment, but will instead require that you repay all the remaining payments outstanding on the lease.
How long does the application process take?
One of the main advantages of equipment leasing is a streamlined application process followed by most leasing companies where approvals for smaller ticket items can be approved in a couple of hours and larger capital requests requiring from 1 to 3 days. Compared to a traditional banking process that is famous for red tape, paper work, and days of waiting for an answer, equipment leasing is one of the fastest forms of business financing available.
What percentage of the equipment can be financed?
In most cases, you can receive 100% financing of the equipment purchase price. And if there is delivery and installation costs involved, they usually can be financed as well, providing more than 100% financing. In certain industrial like medical services, lease companies will also considering financing leasehold improvements with equipment purchases.
With 100% financing, all the leasing company will require is one or two lease payments in advance making leasing very cash flow friendly.
Can I apply for equipment financing before I have an asset picked out?
Yes, its very common for business owners to seek a pre-approval for a certain asset type prior to purchase. This helps you better understand if financing will be available to you as well as the related terms and conditions. Then, when you are ready to make a purchasing decision, it process will be completed very quickly because financing has been pre arranged.
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