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.
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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.