Equipment Leasing 101
Sometimes you may need exclusive equipment to run and develop your business. However, when you think of buying it, your pocket may not allow for the same. At this moment, equipment leasing is the rescue you need.
What Is Equipment Leasing?
The Commerce Finance Institute (CFI) terms equipment lease as an agreement for using a piece of equipment for a quantified period where the operator of the equipment becomes the lessee and approves to make disbursements to the lessor of the equipment with precise terms and condition.
In simple layman’s language, you are renting the equipment.
When Do You Need to Lease Equipment?
Before leasing or even buying equipment, it is essential to consider several factors. Look at your current business objectives to see whether there is a need to lease that equipment. You need to do a reality check and ask yourself several questions, as listed below.
• Will the equipment fit into my business plan?
• What is my projected return on investment?
• Is the time right to get the equipment comparing to the prevailing rates in the market?
What Is the Difference Between Financing Equipment and Leasing Equipment?
Financing equipment means you buy equipment with borrowed money from a lender. Thus, you own it. On the other hand, Leasing equipment is essentially renting the equipment. Another way you can acquire equipment is by buying equipment outright.
What Are the Pros and Cons of Equipment Leasing?
Pros of Equipment Leasing
• For average companies, equipment leasing is more efficient and more comfortable to acquire than loans.
• The only security pledge is for the equipment itself, which precisely is not yours. You are borrowing it from the lessor.
• It is technically easier to obtain equipment via leasing rather than getting a loan or buying it.
Cons of Equipment Leasing
• Most lease agreements place a considerable burden on you in terms of any repair or maintenance needed.
• Often, lease payments have a higher built-in cost structure than loans.
What Is Involved in the Equipment Lease Contract?
First, you’ll need to decide on the equipment that suits your needs. Onto the next step, choose the best lease that suits your needs. Choose the best equipment lease that you can afford. One crucial factor is to choose a leasing company to work with.
Before getting to any company agreement, you have to owe it to yourself to deal with the best. The last step is convincing a lessor that you are the type of company they wish to work with. You will need to have financial documents and reasons why you need the equipment. The process is just like applying for a loan in the bank. Nevertheless, this is not that intense since you are not borrowing money, but you are simply leasing equipment that you don’t own.
How to Choose the Best Equipment Leasing Company
Since this is a long-time financial decision, it is vital to choose the right company. The best equipment leasing company can be that one that specializes in the type of equipment that you want to rent. It is also vital to range the strength and integrity of the equipment leasing company. At DrawBridge Capital we offer advisory services on any of your financial matters at relatively affordable rates. Contact us and let us help you out.