How do I decide which lease is best for my business?
Some critical questions to ask your self when considering equipment financing are:
- How predictable is your cash flow?
- How long will you need the equipment?
- How quickly will the technology of the equipment improve?
- What is your monthly budget?
- What are your tax needs? The Capital Funds Leasing team can provide general information about the tax benefits of the different lease types.
- Do you want to own the equipment at the end of your lease?
Call Beacon Leasing today to get your application started!
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.
When Start-Ups Should Lease?
Startups should explore equipment financing with Beacon Leasing if they:
- require a lot of expensive equipment but wish to avoid tieing up large sums of money on the downpayments required by purchasing,
- need to change their equipment frequently and thus avoid having capital tied up in soon-to-be-obsolete equipment,
- have the cash flow which can readily cover the monthly payments but don’t have the money to lay out for a purchase of equipment.
Equipment Leasing
Instead of your startup buying equipment, it can lease it. Under a lease you contract to pay a monthly rental fee for its use. Equipment leasing is available for all types of equipment from major manufacturing equipment to smaller equipment such as computers. Equipment leases are available from banks and finance companies as well as from equipment manufacturers and dealers.
Why I Lease?
- Leasing offers flexibility and can be structured to fit your individual needs.
- Leasing allows you to conserve your cash flow. We dont require a down payment, and we offer 100 percent financing.
- Leasing offers tax benefits by being able to deduct your payment as a rental expense.
- Leasing allows you the option to purchase the equipment at the end of the term.
- Leasing allows business owners to pay for the equipment they use today, with the revenue they generate tomorrow.
To Lease or to Buy?
Here is an article on Leasing from Business Wire.
Association survey of the Small Business Administration’s State Small Business Contest winners, 86 percent lease equipment, for reasons that range from budgeting and establishing consistent cash flow to the ability to upgrade equipment more frequently.
However, although equipment can be leased to handle needs in almost any industry, many small to mid-sized business owners are unsure how to determine whether this option is right for them.
Common types of leases
“Most business owners believe they need to own their equipment,” says David Wolf, CEO of Hennessey Capital Leasing. “But it’s worth noting that the benefit of many assets derives from use, not from ownership, making the financial implications the most important consideration.”
Wolf adds that leasing provides greater flexibility in financing options for asset acquisitions and business expansion. “Every situation is unique, so the key is trying to find the right structure to fill that particular need.”
The two most common lease arrangements are capital leases and operating leases. A capital lease, which Wolf refers to as a “loan in disguise,” allows the lessee to depreciate the asset and write off the interest, while avoiding a large down payment. Capital leases appeal to businesses that ultimately plan to own the equipment but prefer to preserve their banking relationships and working capital for other ventures.
On the other hand, operating leases can be an ideal option for companies that regularly upgrade equipment. Operating leases provide a hedge against obsolescence: the ability to return the equipment to the lessor at the end of the term. This frees the lessee from any obligation and can facilitate the upgrade process. These leases also tend to yield lower payments and are expensed, so they don’t appear on the balance sheet as long-term debt. One of the most attractive features of an operating lease structure is the tax benefit, which allows the lessee to write off the entire amount of the lease payment. “In capital intensive industries, it can make a lot of sense to structure something as an operating lease,” says Wolf.
Optimizing Capital Equipment
Many physician group practices struggle over whether to buy or lease equipment. While purchasing has been the traditional method of acquiring equipment, leasing often can be more cost-effective. Conducting a lease-versus-purchase analysis can help group practices arrive at the most cost-effective
decision. Careful consideration of the alternatives can lead to the best use of the group’s resources to meet its financial goals.
Whether to lease or buy medical equipment is not always a clear-cut decision. Purchasing is the traditional method of equipment acquisition for most group practices, and many continue to use cash to acquire needed equipment.
The pressure to reduce healthcare delivery costs, however, has made more stringent reviews of capital equipment acquisitions imperative. As a result, more group practices are choosing to lease medical equipment. The advantages of leasing include flexibility, convenience, and protection against technological obsolescence. And, in many cases, leasing can be more affordable than purchasing.
Decision Factors
Analysis of major capital equipment acquisitions needs to go beyond a simple return on investment (ROI) or hurdle rate analysis and consider other factors, including the estimated technological life of the equipment and the group’s financial position.
Technological life of the equipment. The equipment’s useful technological life should be considered in light of the group’s long-term goals. Equipment that is projected to become obsolete over an anticipated period of use is a good candidate for leasing. A properly structured lease allows the user to shift the risks of technological obsolescence to the lessor and acquire new technology at the end of the lease term. The lease also allows the user the flexibility to purchase the equipment or renew the lease if the group decides the equipment can continue to provide the required level of performance . Click here for more.
Obtaining New Equipment
Leasing is a popular, cost-effective means of acquiring industrial equipment. You rely on equipment every day to operate and grow your business. However, the value of that equipment comes from using it, not owning it. By leasing, you transfer uncertainties and risks of equipment ownership to the lessor. This allows you to concentrate on using equipment as a productive part of your business not a drain on the bank account.
Leasing for New Business Owners
Starting a new business can be both expensive and time consuming. By doing business with Beacon Leasing you can decrease your startup costs and save the headache of leasing directly from a bank.
The average business startup costs to start a small business in the United States is $10,000. This cost can increase greatly if the business requires expensive equipment to operate. By taking advantage of Beacon Leasing’s zero down leasing contracts, you can start operating your business with all the equipment you need without a large startup cost. The low monthly payments allow businesses to spread their startup costs over a period of many years. Beacon Leasing will do business with anybody who has a business license, so you can start leasing before your business even operational.
Going from bank to bank trying to find the best deal on equipment leasing can be a large headache for small business owners. Beacon Leasing saves you the headache by shopping around and finding you the best price possible for your leasing needs. Leasing from a bank can some times be very hard for a new business because there is limited credit history available. Beacon Leasing has been doing business with many banks for over 16 years, so we can get you the money you need to start your business.
If you are considering starting a business but the start up cost is your main concern, leasing may be the answer to your problems. Beacon Leasing has been working with small businesses for many years so we can help you with any of your leasing needs.
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