Top 10 Reasons Why Leasing Equipment is Much Smarter
than Borrowing from a Bank
- Banks can charge you a fee on your line of credit, even if you never use it. Leasing companies charge only for what you use.
- Banks require that you put some cash down, in some cases as much as 20% to 30%. This can eat away at your working capital. Leasing companies don't.
- Banks are not as flexible as leasing companies. Equipment leasing companies can create an individualized lease arrangement for you such as no payments for 90 days to give you time to get your new equipment up and running. Banks can't.
- If you borrow too much from a bank, this can limit your ability to get future loans and you have fewer options during crises. Leasing allows you to expand and diversify your funding sources.
- Banks won't give you 100% financing. Leasing companies will. In fact, when you lease from a reputable leasing company, you can get 100% financing for not only the cost of the equipment, but for labor, installation and even training or consultation.
- Banks can put liens on all of the assets of your company including receivables and inventory. Leasing companies only put a lien on the equipment.
- Banks may recommend, especially to small business owners, that they take out a home equity loan for new equipment. This is a very bad idea. Why finance a piece of equipment for a few years with assets such as a home that you will keep for a longer time? Leasing is a much wiser strategy for expansion.
- Leasing allows businesses to fully expense lease payments as a rental and provides valuable tax deductions for your business.
- Reputable leasing companies work closely with equipment companies. They know the equipment business and can advise you on exactly what you need to make your business profitable as soon as possible. Banks don't.
- Leasing companies offer a variety of options that banks can't match. These include:
Lease Purchase ($100 Buy-Out) - allow you to buy the equipment at the end of the lease term for a nominal amount of $100.
Operating Lease (Fair Market Value Buy-Out) - provides you with the option to purchase the equipment at the end of the lease for its then Fair Market Value, continue leasing the equipment based on its Fair Market Value, or return the equipment.
Venture Leases - a perfect solution for start-up companies with venture capital backing.
Deferred Payment - ideal for companies in which the equipment will be used for a project that won't generate revenue for a short period of time, so that the initial months have nominal or no payments.
Seasonal Payment - designed for those businesses with seasonal cash flows so payments might be higher when business is good for example in the summer months and lower during the rest of the year.
Step-up / Step-down payments structured to match a company's cash flow needs. Payments can start low and then increase during the later years of the lease, or payments can start high and then decrease, minimizing finance charges.
Municipal Lease - available to all city and state agencies such as public school districts, municipal hospitals, police and fire departments. Due to the tax-exempt status of the Lessee, rates are much lower than standard commercial rates.