Equipment Financing article
Entrepreneurs may opt for equipment lease financing rather than investing cash in machinery that may become obsolete over time or increase overhead expenses. Technology, especially in electronics, changes so rapidly that corporations often prefer leasing computers, laser printers, copiers, and even telecommunications systems rather than buying. Business owners reason that money spent upgrading or purchasing new equipment to keep pace with technological advances every few years could be better utilized by entering into either a “true” or a “finance” lease agreement. Another consideration for leasing over buying is simply to keep down overhead. Many companies, especially startups, cannot afford to furnish offices full of computer systems, desks and chairs, and file cabinets without breaking the bank. Long term rentals level the playing field between large corporate moguls with limitless funds versus small businesses with limited operating capital.
When businesses need machinery, computers, or copiers but lack the cash, they often opt for a true lease agreement which is similar to renting a piece of machinery or furnishings for an extended period of time with the intention of exchanging, or upgrading items at the end of the term or when newer models become available. Lessees have the advantage of having access to state-of-the-art tools and accessories without paying top dollar. True equipment lease financing may be more popular because monthly installments tend to be lower than a finance agreement, which works similar to buying on an installment plan. Companies which offer business accessories on a true lease can make more revenue by renting items again and again to various individuals and businesses. For example, a company leases a copier to a small firm for one year, at the end of which the lessee decides to upgrade to a pricier model with more features. The copier company has the option of leasing the older unit to another business owner, and another, until the original wholesale price of the copier has doubled or even tripled, especially when financing fees are added.
Certain types of long term equipment lease financing allows business owners to eventually own the machinery, computer, or copier at the end of the agreement or simply terminate the agreement and rent another piece of equipment. Finance leasing offers business owners an installment plan which works similar to buying an automobile or other big ticket item. All monthly payments go towards the purchase of the item; and lessees only need to make a buyout payment to transfer ownership, unless they decide to rent another piece of equipment under a separate agreement. Click here for more.