Efficiency and convenience are two things small-business owners can't get enough of. But what else is luring them away from buying equipment? For businesses that need equipment and need it now, leases are a speedy alternative. While banks can take weeks to approve business loans, leases are often approved overnight, with far less paperwork and looser credit requirements.
"We process lease documents by fax, with fast turnaround," says Steve Brooks, president of Lease Consultants Corp. in Des Moines, Iowa, whose company purchases equipment from dealers and then leases it to customers. "We [offer] credit approval and authorizations with a minimum of red tape, and documentation that's easy to understand," says Brooks.
In addition to freeing up your cash and leaving your conventional lines of credit open, leasing also offers tax advantages, Brooks points out. Lease payments are usually 100 percent tax deductible as a business expense, while bank loans are not.
Businesses that have maxed out their credit options and don't have the extra cash to sink into an assortment of equipment are finding relief in leasing. Scott Olsen, co-owner of Colex International, a collection agency based in Huntington Station, New York, found the toughest part of getting his business off the ground in 1994 was getting credit. "All I had at that time was $5,000 and some letterhead. I needed a computer, copier, laser printer, phone, voice mail and furniture," says Olsen, 41. "My initial inquiries were to my bank for a loan, but they wanted financial statements, and I had none. My first financing came through a computer manufacturer, who leased us three units. Today, with 22 employees, we have 15 leases for more than $100,000 worth of equipment."
Olsen cautions, however, that one drawback of leasing is that he has to personally guarantee payments. "Still," he says, "that beats taking a second mortgage on my house."