Last year marked the fourth straight year of recovery for the U.S. equipment leasing industry. A robust U.S. economy led many manufacturers and service companies to continue investing in new equipment, benefiting equipment lease providers. Although economic activity demonstrated relative strength, the U.S. economy shows signs of slowing and equipment leasing companies are reacting. What do these developments portend for companies looking for equipment leases?
A survey conducted by the Independent Equipment Company and the Equipment Leasing and Finance Association (ELFA) revealed that leasing companies are becoming more selective and cautious in making their equipment leasing investments. These companies are pursuing certain types of equipment and industries and shying away from others. Driving these preferences are some of the following concerns: 1) the prospect that our economy is drifting into recession; 2) if the economy slows significantly, residual values for certain types of equipment will erode; 3) continued malaise in the credit markets caused by the sub-prime mortgage meltdown; 4) stagflation; 5) high energy prices; and 6) pressure on certain equipment values caused by a declining dollar and foreign competition.
The survey also revealed the leasing industry's strong preference for seven equipment types:
• Oil/gas/energy
• Aircraft
• Marine/intercoastal equipment
• Medical
• Computers/high-tech
• Rail
• Machine tools
However, the industry seems to be shying away from these equipment types:
• Plastics manufacturing
• Truck/trailer
• Printing
• Automobiles
Shedding even more light on industry leaders' views about future market prospects, ELFA revealed the prognosis of its annual Industry Future Council (IFC) meeting. The IFC is a panel of two-dozen senior executives representing a cross section of the equipment leasing and finance industry. Here are some of their conclusions:
• The industry is in the midst of a correction that began last year. A liquidity crunch set off by the sub-prime mortgage debacle and fears about the state of the economy triggered the correction.
• Going forward, the ability to access funding will critically differentiate lease providers. This development may impact lessees, particularly at the lower end of the credit scale, as they look for new leases at favorable rates and terms.
• The panel noted the continued trend away from pure leasing, toward loan-type equipment financing products. The lack of desire and ability of leasing companies to stomach residual equipment risk may explain this trend.
• Some banks and large independent finance companies must now face the Basel II capital adequacy requirements mandated by federal regulators. These stricter capital requirements may cause certain of these companies to exit the equipment financing market and create new opportunities for smaller unregulated competitors.
Most industry leaders remain optimistic regarding long-term prospects for equipment financing. The industry remains sound, leasing portfolios continue to perform well, and the demand for equipment financing remains strong even in the face of a slowing economy. Yet, like other industries that rely on robust economic activity to thrive, the outlook for equipment leasing depends on U.S. economic performance --- which seems to be sagging.
What impact will the slowing economy, the credit crunch, and the flight of leasing providers away from certain equipment types have on companies shopping for new leases? So far, system liquidity appears sufficient to satisfy the overall demand for equipment leases. Tighter credit and equipment preferences might lead some leasing providers to raise their credit standards and/or rates for certain lease transactions --- particularly those involving trucks, trailers, automobiles, plastic manufacturing and printing. However, lining up new leases in certain segments, like home construction, could prove more difficult.
In other parts of the market, the flight away from certain equipment types presents an opportunity for smaller leasing competitors. While it is possible that less credit-worthy companies may get closed out of some transactions, it is more likely that these firms will still be able to secure leases, but be subject to higher rates and tighter terms. In this regard, like other segments of the commercial finance market, equipment leasing will probably pull back from the frenzy of recent years to a more measured, sustainable pace.
Wednesday, May 7, 2008
Leverage Your Business By Leasing Your Business Equipment
One of the main reasons people are in business is to gain or maintain financial or economic vitality. The best way to do this very thing is to properly leverage yourself, especially when acquiring new equipment. This is particularly true when making a larger purchase. Examples of larger purchases would include computer equipment, construction equipment, yellow iron, specialty trucks, manufacturing equipment, printing equipment, medical equipment, etc. These sort of things can run $15,000 to $20,000 on the low end of the spectrum and on the higher end can cost hundreds of thousands and even millions depending on what you are buying.
Let's look at an example in the construction field. Your business is booming and you need to get your hands on a new bulldozer. Let's just say this is going to run you about $90,000 or so. You look at a traditional bank loan, it's feasible but they want 25% down. That's a hefty chunk of change at $22,500. Even if you have the cash to the tune of about $30,000 to $35,000, you'd only be left with $7,500 to $12,500. That's not much cash on hand to cover all your other business expenses like payroll, insurance, the cost of running your equipment, etc. How long does it take you to get paid on your invoices? Often times it takes 60, 90, or 120 days to get paid-right? When you consider this, leaving yourself with only $7,500 to $12,500 in working capital can prove to be quite stressful and burdensome. One way to economic vitality is to leverage your business by leasing your business equipment.
Leasing your equipment can be much simpler than your run of the mill bank loan. Often times only a simple application is required (up to $250,000). What do you need at the bank for this type of loan-tax returns, financials, a blanket lien, and sometimes they are finicky about your time in business and previous credit issues? When you lease equipment it can often be done with nothing down or just 1 or 2 payments up front. This will leave you with a lot more working capital so that you can use your cash for items that may not be able to be financed. Leasing also yields better tax advantages and that is why Fortune 500 companies lease their high ticket equipment. Leasing can also be done for those that have low credit scores (under 500 is possible).
Another reason to leverage your business through leasing is that there are no financial covenants required with a lease and there typically are with a loan. Adhering to your financial covenants can be a tedious and time consuming task.
As a business owner, you need to do what you do best-running the show and getting new business. Why bother with chasing down endless piles of paperwork for a bank loan when you can lease the larger ticket items you need to acquire? Why bother depleting your cash reserves when you can lease your equipment and also take advantage of the tax advantages associated with leasing? Opt for economic vitality and leverage your business by leasing your business equipment.
Let's look at an example in the construction field. Your business is booming and you need to get your hands on a new bulldozer. Let's just say this is going to run you about $90,000 or so. You look at a traditional bank loan, it's feasible but they want 25% down. That's a hefty chunk of change at $22,500. Even if you have the cash to the tune of about $30,000 to $35,000, you'd only be left with $7,500 to $12,500. That's not much cash on hand to cover all your other business expenses like payroll, insurance, the cost of running your equipment, etc. How long does it take you to get paid on your invoices? Often times it takes 60, 90, or 120 days to get paid-right? When you consider this, leaving yourself with only $7,500 to $12,500 in working capital can prove to be quite stressful and burdensome. One way to economic vitality is to leverage your business by leasing your business equipment.
Leasing your equipment can be much simpler than your run of the mill bank loan. Often times only a simple application is required (up to $250,000). What do you need at the bank for this type of loan-tax returns, financials, a blanket lien, and sometimes they are finicky about your time in business and previous credit issues? When you lease equipment it can often be done with nothing down or just 1 or 2 payments up front. This will leave you with a lot more working capital so that you can use your cash for items that may not be able to be financed. Leasing also yields better tax advantages and that is why Fortune 500 companies lease their high ticket equipment. Leasing can also be done for those that have low credit scores (under 500 is possible).
Another reason to leverage your business through leasing is that there are no financial covenants required with a lease and there typically are with a loan. Adhering to your financial covenants can be a tedious and time consuming task.
As a business owner, you need to do what you do best-running the show and getting new business. Why bother with chasing down endless piles of paperwork for a bank loan when you can lease the larger ticket items you need to acquire? Why bother depleting your cash reserves when you can lease your equipment and also take advantage of the tax advantages associated with leasing? Opt for economic vitality and leverage your business by leasing your business equipment.
Monday, March 31, 2008
Car Lease Without The Penalties
If a person wants to terminate their car lease which they have, doing so they will often incur some very heavy penalties from the leasing company. Today however, there are now ways in which one can get rid of a leased vehicle and which should help to prevent them from incurring any kinds of penalties.
In this article, we look at companies who are now providing a service that matches those who are wishing to get out of a lease agreement to those who are willing to buy into one. So for a fee these companies are in fact acting as online service that is able to match up the right lease seller with the right buyer.
After a deal has been made between the lease seller and the lease buyer the company who has acted as intermediary between the two parties will arrange for the transfer of the lease and title documents. They also help both the buyer and seller to work their way through the processes to this transfer to ensure that everything remains legal and above board.
If you are thinking about using the services of anyone of the many lease-trading companies that are online, you need to factor in certain things. The first being that you will be expected to pay will be their fees for using their services. The initial fee that you are going to be charged for setting up the listing will be between $30 and $130. Plus along with this, some companies may also charge you a further fee of between $95 and $150 to carry out the transfer.
However, what you will often find is that the fees that these companies charge you for using their services will be far less than those you would expect to pay to either a lease company or a car dealership. In a lot of cases where people have chosen to terminate the lease on a vehicle, the dealer or lease company has required any monies that are owed to be paid in full along with a fee for termination of the lease. Whilst there are other dealers and lease companies who instead will require that you actually purchase the vehicle from them.
When a person sells a leased car through a lease-trading company, they list the vehicle with them and then any potential buyers will contact them directly. Once contacted, it is then between the buyer and seller to negotiate the price at which they are both happy with.
Only after a deal has been brokered between the seller and buyer of the lease will the lease-trading company get involved again. After the deal has been done then all matters relating to the processing of the paperwork to transfer the lease and title over to the buyer will be carried out by the lease-trading company.
When you are thinking of selling a car lease by using a lease-trading company you need to be aware that although the majority of dealers, lease companies and car manufacturers are happy for such transactions to occur, there are some who are not. For example, companies such as Nissan and Audi will only allow such transfers to take place as long as the original lessor of the vehicle retains some liability for it once the transfer has occurred.
In this article, we look at companies who are now providing a service that matches those who are wishing to get out of a lease agreement to those who are willing to buy into one. So for a fee these companies are in fact acting as online service that is able to match up the right lease seller with the right buyer.
After a deal has been made between the lease seller and the lease buyer the company who has acted as intermediary between the two parties will arrange for the transfer of the lease and title documents. They also help both the buyer and seller to work their way through the processes to this transfer to ensure that everything remains legal and above board.
If you are thinking about using the services of anyone of the many lease-trading companies that are online, you need to factor in certain things. The first being that you will be expected to pay will be their fees for using their services. The initial fee that you are going to be charged for setting up the listing will be between $30 and $130. Plus along with this, some companies may also charge you a further fee of between $95 and $150 to carry out the transfer.
However, what you will often find is that the fees that these companies charge you for using their services will be far less than those you would expect to pay to either a lease company or a car dealership. In a lot of cases where people have chosen to terminate the lease on a vehicle, the dealer or lease company has required any monies that are owed to be paid in full along with a fee for termination of the lease. Whilst there are other dealers and lease companies who instead will require that you actually purchase the vehicle from them.
When a person sells a leased car through a lease-trading company, they list the vehicle with them and then any potential buyers will contact them directly. Once contacted, it is then between the buyer and seller to negotiate the price at which they are both happy with.
Only after a deal has been brokered between the seller and buyer of the lease will the lease-trading company get involved again. After the deal has been done then all matters relating to the processing of the paperwork to transfer the lease and title over to the buyer will be carried out by the lease-trading company.
When you are thinking of selling a car lease by using a lease-trading company you need to be aware that although the majority of dealers, lease companies and car manufacturers are happy for such transactions to occur, there are some who are not. For example, companies such as Nissan and Audi will only allow such transfers to take place as long as the original lessor of the vehicle retains some liability for it once the transfer has occurred.
Turn-In lease
What is a Turn-In lease?
A turn-in lease for fire apparatus is a conventional 5 or 7 year municipal lease purchase with 1 important difference- You can't pay a $1 at the end to own your apparatus after making the payments.
You have 2 choices:
1. Buy the truck at about 30% - 50% of the original cost, or
2. Turn it back to the manufacturer if it meets certain requirements (or pay penalties for the manufacturer to accept the truck as-is)
A Turn-In Lease is perfect for fire departments who:
1. Have a formal replacement program that replaces fire trucks every 5 or 7 years, and
2. Will maintain the trucks within the operating requirements of the manufacturer, and
3. Is 100% sure they will buy the replacement truck from the same manufacturer, or
4. Is not worried about raising or borrowing money if they choose to purchase the truck in 5 or 7 years.
Discipline is required to maximize the effectiveness of a Turn-In Lease. If your department has exact plans and executes its financial and operating plans well, a Turn-In Lease is a great option. Be sure you're OK with the 4 conditions listed above. A Turn-In Lease is not perfect for fire departments who:
1. Is not fully committed to replacing their truck in 5 or 7 years, or
2. Does not feel confident that they can maintain the truck according to the manufacturer requirements, or
3. Is not confident that they will buy a replacement truck from the same manufacturer, or
4. Has concerns that they can not raise the cash to buy the truck or worry about higher interest rates in 5 or 7 years to borrow the purchase price.
If any of the above conditions describe you, a Turn-In Lease is probably not the best choice for you. How does a Turn-In Lease work?
A Turn-In Lease is a conventional fire truck lease purchase that requires 5 or 7 annual payments and a large balloon payment at the end. The contract lets you buy the truck for the balloon payment amount or lets you "turn-in" the fire truck for a new truck if you 1.) buy a new truck from the same manufacturer and 2.) the fire truck is kept according to the required condition specified in the contract terms.
If your fire truck does not meet the requirements, you will have to pay penalties to compensate the manufacturer for the required conditions not met.
It's important to know what the requirements are! Get a copy of the requirements upfront and have them signed as part of your contract to ensure you know the rules.
Does a Turn-In Lease save money?
Yes and No. The complete answer is it depends. If you use your fire truck exactly as the manufacturer requires you and would just finance your truck for the same 5 or 7 years, you'd pay lower payments each year for the budget. Most manufacturers present a "money-saving" comparison using a 5 year Lease Purchase which match how you would finance the fire truck. This isn't always true - see HELPFUL HINT below.
A Turn-In Lease will be more expensive if you finance your fire truck for longer than 5 or 7 years. Here's why:
HELPFUL HINT: The Turn-In Lease payments are based on a 8 1/2 year payment schedule. Choose a 9 or 10 year payment schedule if you like the payment amount of the Turn-In Lease but are turned off by some of the other factors of the Turn-In Lease.
Should I use a Turn-In Lease?
Each department has to make that decision for themselves. This article can not tell you the "right" way - every department is unique! There is no universal right way. I've talked with departments that had great success with Turn-In Leases and I've talked to departments that had a disaster.
The key factor is to do a thorough analysis of the terms and conditions of the Turn-In Lease and decide if its right for you.
If you feel like you may not be fully understanding the exact details of the Turn-In Lease offer, get some help. After all, the devil will be in the details of this complex financial offering.
A turn-in lease for fire apparatus is a conventional 5 or 7 year municipal lease purchase with 1 important difference- You can't pay a $1 at the end to own your apparatus after making the payments.
You have 2 choices:
1. Buy the truck at about 30% - 50% of the original cost, or
2. Turn it back to the manufacturer if it meets certain requirements (or pay penalties for the manufacturer to accept the truck as-is)
A Turn-In Lease is perfect for fire departments who:
1. Have a formal replacement program that replaces fire trucks every 5 or 7 years, and
2. Will maintain the trucks within the operating requirements of the manufacturer, and
3. Is 100% sure they will buy the replacement truck from the same manufacturer, or
4. Is not worried about raising or borrowing money if they choose to purchase the truck in 5 or 7 years.
Discipline is required to maximize the effectiveness of a Turn-In Lease. If your department has exact plans and executes its financial and operating plans well, a Turn-In Lease is a great option. Be sure you're OK with the 4 conditions listed above. A Turn-In Lease is not perfect for fire departments who:
1. Is not fully committed to replacing their truck in 5 or 7 years, or
2. Does not feel confident that they can maintain the truck according to the manufacturer requirements, or
3. Is not confident that they will buy a replacement truck from the same manufacturer, or
4. Has concerns that they can not raise the cash to buy the truck or worry about higher interest rates in 5 or 7 years to borrow the purchase price.
If any of the above conditions describe you, a Turn-In Lease is probably not the best choice for you. How does a Turn-In Lease work?
A Turn-In Lease is a conventional fire truck lease purchase that requires 5 or 7 annual payments and a large balloon payment at the end. The contract lets you buy the truck for the balloon payment amount or lets you "turn-in" the fire truck for a new truck if you 1.) buy a new truck from the same manufacturer and 2.) the fire truck is kept according to the required condition specified in the contract terms.
If your fire truck does not meet the requirements, you will have to pay penalties to compensate the manufacturer for the required conditions not met.
It's important to know what the requirements are! Get a copy of the requirements upfront and have them signed as part of your contract to ensure you know the rules.
Does a Turn-In Lease save money?
Yes and No. The complete answer is it depends. If you use your fire truck exactly as the manufacturer requires you and would just finance your truck for the same 5 or 7 years, you'd pay lower payments each year for the budget. Most manufacturers present a "money-saving" comparison using a 5 year Lease Purchase which match how you would finance the fire truck. This isn't always true - see HELPFUL HINT below.
A Turn-In Lease will be more expensive if you finance your fire truck for longer than 5 or 7 years. Here's why:
HELPFUL HINT: The Turn-In Lease payments are based on a 8 1/2 year payment schedule. Choose a 9 or 10 year payment schedule if you like the payment amount of the Turn-In Lease but are turned off by some of the other factors of the Turn-In Lease.
Should I use a Turn-In Lease?
Each department has to make that decision for themselves. This article can not tell you the "right" way - every department is unique! There is no universal right way. I've talked with departments that had great success with Turn-In Leases and I've talked to departments that had a disaster.
The key factor is to do a thorough analysis of the terms and conditions of the Turn-In Lease and decide if its right for you.
If you feel like you may not be fully understanding the exact details of the Turn-In Lease offer, get some help. After all, the devil will be in the details of this complex financial offering.
Sunday, March 16, 2008
Saving Company Money By Finance And Leasing
A common mistake that many first time business owners make is choosing to buy their businesses equipment with a bank loan. In fact, a lot of business owners don't know that there is any other way to get equipment other than buying it. However, those who are seasoned in business know that equipment leasing is by far the more economical choice for a variety of reasons:
How Leasing & Financing Saves Companies Money:
-Lease payments are tax deductible
-Trade in outdated equipment for brand new equipment
-Always have the most productive equipment
-Tax write offs for full depreciation
-Deferred payment options
When you buy equipment with a bank loan, you're stuck with it while it loses value and productivity. When you want to purchase a new piece of equipment, you've first got to find a buyer for the old equipment, most likely taking a loss on the sale, and then get another loan for the new equipment and begin the cycle again.
In the world of business, where productivity and innovation are critical, it just makes sense to ensure that you have the opportunity to upgrade your equipment quickly, easily, and without added cost. While buying and selling can be a cumbersome and expensive process, leasing allows a company to rapidly grow and innovate.
How to Find Business Equipment For Lease
Finding the best deals on equipment leasing for your particular need is really a numbers game. The more you shop around, the better the deal you're likely to find. There are a few things to consider when shopping equipment leasing companies:
-Payments
-Leasing terms
-Conditions
-Approval time
-Option of payment deferral
Finding the company with the right match of criteria for your particular business needs can mean the difference between struggling each month and having plenty of flexibility to grow your business the way you desire.
Instead of attempting to track down and comparison shop scores of leasing companies, most business owners rely on leasing brokers to find the best deals out there for the type of business equipment they need at terms that are idea. Leasing brokers don't cost YOU any money, their earnings come from the company leasing out the equipment.
Choosing a Broker
Because there may be monetary incentives for an equipment leasing broker to steer you in the direction of a particular equipment leasing company, look for equipment leasing brokers who are willing to provide you with multiple options from which to choose. This allows you to compare the terms and conditions of multiple qualified companies, without having to do the time consuming legwork to get the quotes in the first place.
You'll want to look for an equipment leasing broker that works with a large network of leasing companies. The real value of going with a broker is that they know the industry inside and out and have the contacts to quickly match an equipment leasing company to your needs.
How Leasing & Financing Saves Companies Money:
-Lease payments are tax deductible
-Trade in outdated equipment for brand new equipment
-Always have the most productive equipment
-Tax write offs for full depreciation
-Deferred payment options
When you buy equipment with a bank loan, you're stuck with it while it loses value and productivity. When you want to purchase a new piece of equipment, you've first got to find a buyer for the old equipment, most likely taking a loss on the sale, and then get another loan for the new equipment and begin the cycle again.
In the world of business, where productivity and innovation are critical, it just makes sense to ensure that you have the opportunity to upgrade your equipment quickly, easily, and without added cost. While buying and selling can be a cumbersome and expensive process, leasing allows a company to rapidly grow and innovate.
How to Find Business Equipment For Lease
Finding the best deals on equipment leasing for your particular need is really a numbers game. The more you shop around, the better the deal you're likely to find. There are a few things to consider when shopping equipment leasing companies:
-Payments
-Leasing terms
-Conditions
-Approval time
-Option of payment deferral
Finding the company with the right match of criteria for your particular business needs can mean the difference between struggling each month and having plenty of flexibility to grow your business the way you desire.
Instead of attempting to track down and comparison shop scores of leasing companies, most business owners rely on leasing brokers to find the best deals out there for the type of business equipment they need at terms that are idea. Leasing brokers don't cost YOU any money, their earnings come from the company leasing out the equipment.
Choosing a Broker
Because there may be monetary incentives for an equipment leasing broker to steer you in the direction of a particular equipment leasing company, look for equipment leasing brokers who are willing to provide you with multiple options from which to choose. This allows you to compare the terms and conditions of multiple qualified companies, without having to do the time consuming legwork to get the quotes in the first place.
You'll want to look for an equipment leasing broker that works with a large network of leasing companies. The real value of going with a broker is that they know the industry inside and out and have the contacts to quickly match an equipment leasing company to your needs.
Leasing Equipment For Business Leverage
One of the main reasons people are in business is to gain or maintain financial or economic vitality. The best way to do this very thing is to properly leverage yourself, especially when acquiring new equipment. This is particularly true when making a larger purchase. Examples of larger purchases would include computer equipment, construction equipment, yellow iron, specialty trucks, manufacturing equipment, printing equipment, medical equipment, etc. These sort of things can run $15,000 to $20,000 on the low end of the spectrum and on the higher end can cost hundreds of thousands and even millions depending on what you are buying.
Let's look at an example in the construction field. Your business is booming and you need to get your hands on a new bulldozer. Let's just say this is going to run you about $90,000 or so. You look at a traditional bank loan, it's feasible but they want 25% down. That's a hefty chunk of change at $22,500. Even if you have the cash to the tune of about $30,000 to $35,000, you'd only be left with $7,500 to $12,500. That's not much cash on hand to cover all your other business expenses like payroll, insurance, the cost of running your equipment, etc. How long does it take you to get paid on your invoices? Often times it takes 60, 90, or 120 days to get paid-right? When you consider this, leaving yourself with only $7,500 to $12,500 in working capital can prove to be quite stressful and burdensome. One way to economic vitality is to leverage your business by leasing your business equipment.
Leasing your equipment can be much simpler than your run of the mill bank loan. Often times only a simple application is required (up to $250,000). What do you need at the bank for this type of loan-tax returns, financials, a blanket lien, and sometimes they are finicky about your time in business and previous credit issues? When you lease equipment it can often be done with nothing down or just 1 or 2 payments up front. This will leave you with a lot more working capital so that you can use your cash for items that may not be able to be financed. Leasing also yields better tax advantages and that is why Fortune 500 companies lease their high ticket equipment. Leasing can also be done for those that have low credit scores (under 500 is possible).
Another reason to leverage your business through leasing is that there are no financial covenants required with a lease and there typically are with a loan. Adhering to your financial covenants can be a tedious and time consuming task.
As a business owner, you need to do what you do best-running the show and getting new business. Why bother with chasing down endless piles of paperwork for a bank loan when you can lease the larger ticket items you need to acquire? Why bother depleting your cash reserves when you can lease your equipment and also take advantage of the tax advantages associated with leasing? Opt for economic vitality and leverage your business by leasing your business equipment.
Let's look at an example in the construction field. Your business is booming and you need to get your hands on a new bulldozer. Let's just say this is going to run you about $90,000 or so. You look at a traditional bank loan, it's feasible but they want 25% down. That's a hefty chunk of change at $22,500. Even if you have the cash to the tune of about $30,000 to $35,000, you'd only be left with $7,500 to $12,500. That's not much cash on hand to cover all your other business expenses like payroll, insurance, the cost of running your equipment, etc. How long does it take you to get paid on your invoices? Often times it takes 60, 90, or 120 days to get paid-right? When you consider this, leaving yourself with only $7,500 to $12,500 in working capital can prove to be quite stressful and burdensome. One way to economic vitality is to leverage your business by leasing your business equipment.
Leasing your equipment can be much simpler than your run of the mill bank loan. Often times only a simple application is required (up to $250,000). What do you need at the bank for this type of loan-tax returns, financials, a blanket lien, and sometimes they are finicky about your time in business and previous credit issues? When you lease equipment it can often be done with nothing down or just 1 or 2 payments up front. This will leave you with a lot more working capital so that you can use your cash for items that may not be able to be financed. Leasing also yields better tax advantages and that is why Fortune 500 companies lease their high ticket equipment. Leasing can also be done for those that have low credit scores (under 500 is possible).
Another reason to leverage your business through leasing is that there are no financial covenants required with a lease and there typically are with a loan. Adhering to your financial covenants can be a tedious and time consuming task.
As a business owner, you need to do what you do best-running the show and getting new business. Why bother with chasing down endless piles of paperwork for a bank loan when you can lease the larger ticket items you need to acquire? Why bother depleting your cash reserves when you can lease your equipment and also take advantage of the tax advantages associated with leasing? Opt for economic vitality and leverage your business by leasing your business equipment.
Monday, February 25, 2008
Equipment Leasing And Finance Franchises
Many people today dream of owning a business. Being your own boss can be liberating, not to mention profitable. However, small businesses have a disturbingly high failure rate and the new owner wants a prospect with a proven history of success.
Franchises give entrepreneurs the opportunity to open a business with an established regional or national brand identity. With a plan to follow and experts to consult, your chance of success soars. Franchising is the path of choice for the slightly more conservative entrepreneur.
The downside of franchises is that they are often quite expensive, more so than starting a business under your own name. Coming up with the initial capital can be tough and preserving your assets is paramount. One of the largest expenses is equipment financing. When stocking your franchise with equipment, leasing rather than buying is the more cost effective solution.
Start up equipment leasing
The initial franchise fee buys you assets such as the right to use the brand, initial training, and long-term consultation to keep your business running profitably. You still need to acquire the equipment necessary to run the business.
For example, let's say you buy a franchise of a successful, well-recognized steak house but you need tens of thousands of dollars worth of stoves, tables, and plumbing fixtures. Rather than taking out a huge loan to equip your restaurant, equipment leasing allows you to get the kitchen and dining room furnished without depleting your valuable capital.
Financing upgrades
When you own a franchise, you aren't truly your own boss. You still have to make changes at the whim of the parent company in order to preserve the brand. Sometimes this is something simple like integrating a national ad campaign into your local marketing efforts or changing a few options on the menu. Sometimes it's more complicated and expensive.
Parent companies look at the national or global impact of their decisions and project the financials years in advance. They reason that a short-term loss in assets, say from upgrading their restaurants nationwide, is worth it for a long-term boost in profits.
On the multi-billion dollar corporate level that might be fine, but the cost of upgrades can be devastating to the local franchise owner. Small business owners don't have the deep pockets of the parent corporations and it can be daunting to face the prospect of substantial debt in the hope of future profit.
For a small business, equipment leasing allows significant upgrades to be done in a more cost-effective and less financially damaging manner. You don't have to squander your resources nor risk your credit rating on expensive new purchases.
Although you may be part of a national or global franchise, you are actually a small business owner. You have the benefit of consulting with experienced support personnel at the parent company, but you are operating on a tight budget and can't afford huge equipment costs. Equipment leasing is the smart choice for franchise owners.
Benefits And Leasing Plans On Equipments
This article is going to discuss what is equipment leasing/financing, what are its benefits, leasing plans and how it relates to the start up and seasoned business.
Leasing is a form of renting but with a buyout clause at the end of the lease to take title to whatever we are leasing. The requirements to get into the lease may be as low as first and last payment and as much as 25%. Each situation is different and this offers the start up and seasoned business a way to invest very little monies into the business. Additionally, all other monies can be used for operating expenses such as marketing and other key areas. Leasing is not a new form of financing but could be a lending solution to the start up business. The small sample of type of industries that leasing can be used for are the following:
Dump,garbage, tow, flatbed, water trucks, over the road trucks and day cabs, heavy and construction equipment such as bulldozers, tractors, excavators, skid steer loaders, backhoes, flatbed, drop deck, refrigerated, dry van trailers, and industries which include limousines, limousine and shuttle buses, and machinery and production equipment.
The benefits of leasing may result in off-balance sheet financing reporting, tax incentives and conserving cash flow and preserving lines of credit for working capital purposes. Many leasing requirements may only require the initial outlay of first and last rental payment. Most leases finance 100% of the cost of the equipment such as soft costs which include shipping, software, training and installation. Additionally, leasing lets you regularly upgrade your equipment, eliminating your utilization of old, outdated equipment and reducing repair options.
Some of the leasing plans available to the lessee are $1.00, 10% or 20% purchase options as well as Trac Leases and FMV lease buyouts. Additionally, some lenders offer seasonal payments, deferred payments for ninety days, declining payments and half payments for a specified time period. It is important that the lessee understands all these different lease plans available as well as the buyout clauses.
The lessee has many options to consider in negotiating his lease. He must understand each lender's requirements and see if it fits within the realm of the lessee's requirements. Some lenders will accept the start up business whereas others will not want to lend to this group. They consider that their risk capital can be invested in other types of portfolios that can be better served. Many lenders require full documentation which includes a couple of years of personal income tax returns, a personal financial statement, and other underwriters requirements. However, in the past couple of years, there is a select group of lenders out there require an application only program. These lenders have their own computer scoring model and eliminate the necessary additional paperwork of other lenders. These application only programs are usually restricted to the seasoned business, however there are a few out in the industry which will work with the start up business as well. The amounts of the application only program run as high as $250,000 for the seasoned business and $100,000 for the start up. Additionally, the lender will lease the qualified asset probably from 36-60 months and many won't finance any equipment and commercial vehicles over ten years old.
It is important to understand the lease terms, the rate factor the lender is charging and the buyout clauses in the lease to take title. If you anticipate paying off the lease early, you should consult your lender to ascertain there is no prepayments for a early payoff. The last thing to understand that the lessee is going to guarantee the lease.
The last point to consider whether you are a start up and/of seasoned business due to economic conditions, there are some unusual specials available for off leases and repos. The lender has excess inventory on their books that they need to liquidated or re-leased as quick as possible. The minimum credit score for the applicant can be as low as 575 and prior bankruptcies may not be an issue in the credit decision.
Either way, spend your proper time investigating the item you are looking for to acquire, get the best price that you can obtain and secure proper financing.
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