Equipment Finance Options

Equipment Leasing Overview

Equipment is a fundamental part of any business, whether small or large. It is with equipment that businesses render the services that they do. The quality and quantity of equipment a company uses, together with how the company deploys such equipment makes the difference between success and failure in a highly competitive economy.

When it comes to the hardware of a business, companies often prefer to go the extra mile to purchase equipment that will give them an edge in whatever industry they operate. While this quest for better machinery is laudable the methods in which it is obtained are not.

Purchasing equipment off manufacturers’ shelves is a decision most companies choose to take and they do so quite wrongly. In a business, the value of an asset is in its use and the value of that same asset depreciates with its use as well. Equipment is an asset, which satisfies this truth only too well, you buy some expensive piece of machinery, which looks good on your balance sheet, and in the next 4 years its value depreciates to nothing.

Equipment Leasing is the correct option as opposed to buying when your company needs equipment. Equipment is a tool that must be used to its maximum capacity to provide the service your business offers. In this light company should aim to save themselves the wanton waste of money that goes with purchasing equipment and should explore the benefits that come with leasing equipment instead.

Leasing equipment is not an aim at cutting corners or reducing the needed service quality delivered by a business. Equipment leasing is a proactive means of increasing your company’s cash flow that would otherwise be tied down if you considered the purchasing option. This cash flow could impact on other areas of your company’s business and improve your company’s balance sheet in the profit columns. Cash should not be tied down in a quickly depreciating asset such as bought equipment.

Benefits of Leasing

If you’re considering leasing equipment for your company rather than buying, you’re not alone. Statistics have it that over 80 percent of U.S based businesses lease their company equipment as opposed to buying, so you can remain rest assured that it’s a wise decision. To support this fact we offer you some of the financial benefits of commercial equipment leasing.

Financial Benefits of Leasing

These financial benefits of leasing cover how leasing helps your business improve its financing either by saving money or making more money for your company. The list is hardly exhaustive but the points examined here are the strongest and reflect the areas of finance that are most important to a business.

Increased Working Capital – With equipment leasing you save yourself the cost of buying the equipment outright. The money you save from purchasing the equipment can be deployed into other areas of the business. Obtaining a business equipment lease also preserves the line of credit you have from your bank as the financing you use to obtain the leased equipment is much lesser outright purchase. By saving this money you can improve your business edge with the right equipment, turn a better profit and not only retain your existing credit line with your bank but improve it as well.

Improved Balance Sheet – In business the balance sheet is an all too important area of determining performance, not only to your shareholders but also to people who provide major financing such as banks and prospective investors. This improvement comes in various areas: first of all business equipment leases are not recorded as liabilities and thus do not have a bearing on your capital figures. The second area covers the fact that a fixed equipment lease eliminates the need for depreciation, if you had purchased the equipment the cost of the equipment is written off according to use and affects your balance sheet calculations.

Tax-Related Advantages – With a commercial equipment lease your expenses are listed as direct operating expenses, which ultimately lead to a lower taxable income for yourself and your company. Another advantage that makes sense when you compare your leasing arrangement to a purchase is that if you had purchased the equipment, sales tax would then be applied and added to the costs accordingly. In some cases when you lease equipment, sales or use tax is then deducted according to the use of the leased equipment. Whatever the case you should consult with at tax professional to examine the benefits that apply to your company specifically in a lease situation.

Razvan Jr
http://www.articlesbase.com/finance-articles/small-business-guide-to-equipment-leasing-112566.html

How the Equipment Leasing And Finance Industry is financing the economy.

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• Conserves Capital: Leasing conserves valuable company working capital and preserves your bank credit lines.

• Offers a Convenient Application: Provides Quicker Approval with Fewer Hassles

• Preserves Bank Credit Lines: Leasing lets you put your equipment to use immediately to generate revenues – with minimum budgetary impact.

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

• Gives Flexible Payment Options: Leasing permits 100% financing with no down payment, so you get the equipment you need without a major cash outlay. With leasing, you can arrange long, flexible terms with low monthly payments.

• Allows for Easy Upgrades and Add-ons: What if your business is growing and you need to add phone equipment. In most instances, the leasing company will allow you to add this equipment to your existing lease

• Lease payments are fixed, not adjustable: You don’t have to worry about floating interest

Frequently asked questions:

Is leasing of new and/or a used phone systems appropriate? Any business at any stage of development leasing is always an alternative. For start-up businesses with no revenues, “small ticket” leases as in phone systems, those of $100,000 or less, are feasible on the personal credit of the founders or owners.

Is there a supply leasing funds for used phone systems and new phone systems? 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. As a result, they are eager to do business and respond to competition with lower monthly rates.

Can other costs be included in lease of business phone system? Leasing can also finance the soft costs often associated with equipment purchases, such as installation and training services.

How hard is it to obtain lease financing for a used phone system? Easy for leases of less than $100,000. An application for a small-ticket lease is generally no more complex than a credit card application. Leases for more than $100,000 require detailed financial information from the business, and the leasing company conducts a more thorough credit analysis than it would for a smaller transaction.

How do I find a leasing company for by new or used business phone system? Finding an equipment-leasing company is easy. Almost any phone system equipment a phone system installer could conceivably provide offers a lease option.

What are the lease option terms I can expect for new phone systems and used phone systems? Usually the leases are set up in terms of 24, 36, 48 or 60 month terms.

What are my purchase options of this phone system at the end of the lease?

$1.00 Buy Out: At the end of the lease term, lessee may purchase the equipment for $1.00. (Most popular because then you can own the equipment at the end of the lease for $1.00. The monthly payment is only slightly higher then the other purchase options.)

10% Purchase Price: Customer may purchase the equipment at the end of lease for 10% of the original transaction cost.

Fair Market Value: This program gives you the most flexibility with upgrades to combat obsolescence. At the end of the lease term the lessee can continue to lease the equipment, return the equipment or buy it at its fair market value.

What is my down payment? The options are usually no down payment, one months lease, or first and last month’s lease payment.

In summary, conserve capital with monthly lease payments on your business phone system, installation and voice/network cabling. Though it’s not apparent at first glance, the company offering the lease financing for your used phones or new phones is not the same one that is selling the equipment. The company selling the equipment simply makes a direct referral to a leasing company with which it does business.

It’s a good idea to get a quote from the leasing firm referred by the company that wants to sell you the equipment. The quote should be competitive. After all, the company selling products wants to sell as many as possible, and it surely doesn’t win any points by referring a leasing company that gouges its customers. But it also pays to get another quote. Usually, the company selling the equipment works with more than one leasing company. Or ask a friend or a business associate for a referral.

Mark Allen
http://www.articlesbase.com/business-articles/7-reasons-to-lease-your-next-business-phone-system-new-phone-system-or-used-phone-system-86432.html