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Equipment Leasing

Conserve cash by leasing instead of buying.

Definition Or Explanation: Equipment leasing is basically a loan in which the lender buys and owns equipment and then rents it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business may purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing, lease new equipment or return it.

Appropriate For: Any business at any stage of development. For start-up businesses with no revenues, small ticket leases, those of $150,000 or less, are feasible on the personal credit of the founders or owners if they are willing to make the monthly payments.

Supply: Abundant. Of the billions of dollars individual and institutional investors pour into the capital markets each month, a good hunk finds its way to leasing companies that use these funds to purchase equipment on behalf of small businesses. With more and more money flowing into the markets, leasing companies are flush with capital, eager to do business and responsive to competition with lower monthly rates.

Best Use: Financing equipment purchases. Leasing can also finance the soft costs often associated with equipment purchases, such as installation and training services.

Cost: Lease financing is generally more expensive than bank financing, but in most instances, it is more easily obtained.

Ease Of Acquisition: Easy for leases of less than $150,000. An application for a small-ticket lease is generally no more complex than a credit card application. Leases for more than $150,000 require detailed financial information from the business, and the leasing company conducts the same credit analysis a conventional bank would.

Range Of Funds Available: Unlimited

From Where's the Money? Sure-Fire Financing Solutions for Your Small Business, by Art Beroff and Dwayne Moyers. (c) Entrepreneur Press, 1999.

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