Before you sign any lease, be sure you understand all the terms and conditions of the agreement. If you decide two months after you sign the lease that you don't need the equipment or need another type of equipment, you could be out of luck. Some companies won't release you from the contract, which could leave you paying for unneeded equipment for years; others will charge you a hefty fee to terminate the contract.
Your accountant can help you decide whether leasing is a good option for you and recommend the types of leases that are good for your specific needs. Go over the following questions with him or her, then grill the company you plan to lease from.
- What specific types of equipment do I need to grow my business? How long will I need this equipment?
- What can I afford in monthly payments?
- How are the payments calculated? Can I get a three- to five-year cost analysis?
- What are the tax pros and cons?
- Can I get a sample copy of the lease being offered so my accountant and I can study its terms at our leisure?
- How is this lease terminated?
- What are the buyout options? Are they negotiable?
- Can I upgrade at no cost? If so, within what time limits?
- How flexible is the payment schedule?
- Are there any incentive programs available?
- What's the average turnaround time on my application?
- What are the conditions for servicing or replacing the equipment? Do you have 24-hour maintenance service?
- What are the maintenance estimates on the equipment? Am I responsible for ordering and paying for replacement parts, such as printer toner?
- Are shipping costs, installation, training or warranties included in the payments?
- Will I be charged documentation fees? What are the late-charge fees?
Once you've answered these questions, slow down. Don't jump into the first lease offered. Take the time to shop around for the equipment you need and the lease that is most appropriate for your cash flow, business needs and income. When you accept the delivery, check out the equipment thoroughly to make sure it meets your specifications. Above all, don't sign up until you understand every clause in the lease you're considering and its implications for your future growth. Ask questions and get responses in writing, if necessary. Leasing office equipment can be a boon to entrepreneurs who are short on capital but long on potential; just make sure you understand how it affects your financial picture and future growth.