Argh! The high cost of buying all that office and computer equipment for your small business! It's enough to drive you to . . . leasing. That's right. Many start-ups are taking advantage of equipment leasing, and for good reason.
"Leasing offers people the opportunity to do things they couldn't afford to do otherwise," says Cynthia Walker, president of CW Leasing in Marina Del Rey, California. "Anything you purchase can be acquired through lease financing, including computer systems, office furniture, light industrial equipment, even installed phone and security systems."
Leasing also gives you flexibility that purchasing can't. Many small companies, especially start-ups, have unusual cash flow patterns and irregular streams of income.
"Leases can be structured to suit the needs of the business owner. A good leasing company will work to meet your needs," she adds.
Equipment is costly, but with leasing, you can start making profit with the equipment after as little as one payment.
"Depending on your profit margin, you may be making enough profit to cover the interest cost of the equipment, bringing your net financing costs to near zero," says Walker.
Leasing also helps you conserve operating capital, which you'll undoubtedly need for other areas, such as personnel and advertising. And since the cost of equipment doesn't show up on your balance sheet, leasing can help keep your lines of credit open.
How popular is leasing? Leasing accounted for 30 percent of all business investments in equipment in 1994, up from 27 percent in 1985, according to the Equipment Leasing Association in Arlington, Virginia.
"Leasing used to be a big-company strategy, but more and more we're finding small companies and even sole proprietors taking a look at leasing as another form of financing their business," said Walker.
When shouldn't you lease? When you can buy used equipment for appreciably less, since leasing usually only applies to new equipment. Remember, also, that leasing costs more in the long run, due to interest on the equipment. So if you have the cash on hand, it may make sense to buy.
For more information on leasing, ask for the free booklet, "Equipment Leasing is Good Business," available from the Equipment Leasing Association, 1300 N. 17th St., Suite 1010, Arlington, VA 22209, (703) 527-8655.