There are a wide range of options that healthcare providers can utilize to acquire much-needed equipment. This article summarizes these choices and offers advantages and disadvantages to each option.

Options for equipment acquisition:

1. Cash Payments

This option assumes that there is enough cash available.

Advantages:

* It’s simple and quick.

* Everybody accepts cash

* Cash purchases minimizes paperwork and may help reduce purchase price.

Disadvantages

* It’s generally not a good use of funds because it ties up much needed capital that can be utilized in other profitable ways.

In today’s investment market, you can often obtain a yield on your money in excess of the interest charged for financing the equipment purchase. The only rationale for paying cash for the purchase is if your funds are in a low-paying account whose yield is less than the interest on a loan or lease. In that case, taking the funds from a low-yield account in order to avoid paying 9% or 10% is a sound financial decision. Of course, having significant funds in a 3% account is not wise cash management.

2. Financed Purchase

In this method of purchase, a lender provides funds for the purchase and generally obtains some form of lien or other encumbrance on the equipment until the funds have been repaid.

Advantages

* It does not deplete cash flow. Usually a 10% to 20% down payment of the total purchase price is required. In many cases, the income generated by the equipment can exceed the payments.)

* Funds not expended for a cash purchase can possibly earn a higher-income yield than the interest rate of the loan.

Disadvantages

* Interest rates may be high.

* The down payment may be high.

* The equipment is encumbered by a third party unless the funds are borrowed from a source other than a financial institution such as a pension fund.

3. Leasing

A lease offers an alternative to traditional financing. With a lease, the equipment is owned by the leasing company. The practice makes payments to the leasing company in exchange for being able to use the equipment (i.e., essentially rental payments). Leases can be closed-ended, in which case the leasing entity retains the equipment at the end of the lease term. There are also open-ended leases, where at the end of the lease term a predetermined amount is paid to the leasing entity, and the practice attains ownership of the equipment.

As a general rule, the higher the residual value (balance owed) at the end of the lease, the lower the monthly payments.

Advantages

* Generally little or no down payment is required.

* Leases are often supported by the equipment manufacturer, which can lower the interest rate or the residual payment (the amount required to attain ownership of the equipment at the end of the lease term).

* Leasing can give you the ability to obtain more purchasing power from a given amount of available cash.

* Sometimes equipment becomes obsolete in a relatively brief period of time. A closed-ended lease may allow you to use the equipment during its useful life and return it to the leasing entity at the end of the lease term. This arrangement could result in lower total expenditures than an outright purchase would have required.

Disadvantage

* In general, more interest is paid than in any other form of acquisition.

Other Leasing Considerations

1. Trade: An equipment manufacturer may have a lease program that makes it easy for the lessee to upgrade. The program can make sense for the lessee if the lessor grants significant credit for the older equipment. This can alter the calculation of the best option for acquisition.

2. Supported Leases or Financing: An equipment manufacturer may support the interest rate of a lease or financing plan. They may lower lease payments by increasing the residual value of a closed-ended lease. Again, these special offers may significantly alter the assessment of the best acquisition option.

3. Purchase Price: No matter what financing option you choose, do not ignore the purchase price. Negotiate your best price before you evaluate financing. Do not fall into the trap that automobile dealers have used for years. You should always start with the purchase price and then move to the terms (whether lease or purchase).

4. Beware of the lease that’s not a lease. The Internal Revenue Service may consider an open-ended lease with a purchase option to be a purchase contract rather than a lease. The impact of this is that the lease payments may not be deducted as expenses. instead, the equipment will be capitalized and depreciated. Have your professional financial advisor evaluate the financing contract to assess your level of risk.

5. Each Transaction Is Unique: Each piece of equipment you are considering for acquisition must be evaluated in the context of the following:

a. Purchase price

b. Projected useful life of the item

c. Your current cash position and monthly cash flow

d. Your current and projected future tax position

e. Financing incentives offered by the vendor

f. Careful evaluation of the lease or financing contract to ensure that it meets the requirements for the method you plan to use to report the equipment in your tax filings

g. Any other considerations required by your expert financial and tax advisors

Discussion

In today’s financial and tax environment, many of the factors that favored one type of financing over another have disappeared. What remain are the purchase price and financing terms, whether the transaction is called a lease or a purchase. Keep in mind that today’s market may not be as good as it was in the past. In the final analysis, you may find that purchasing is cheaper than the interest cost on a lease.

For equipment that you anticipate retaining at the end of the lease or financing term, you must evaluate several factors. The purchase price, down payment, monthly payments, and total payments are key. These factors can be impacted by incentives from the vendor, but ultimately the same evaluation needs to be done

If you are just starting out, your current cash position may dictate that you finance the equipment. Remember to get advice from a professional lease broker to help you sort out the details of the equipment lease.



Repossession

Dollars & Sense

By Denice Gierach

As published in the Naperville Sun – September 16, 2007

In the excitement of forming a new business, whether a person is purchasing a franchise or forming a new business from scratch, one critical step in getting the business started usually gets little attention by the business owner - the commercial lease.

 With everything else new business owners have to decide, they tend to spend too little time understanding the commercial lease.

Before business owners sign any commercial lease, they must read it and know what it means. This seems like common sense, but many people start reading the lease - normally a substantial number of pages with a bit of “legalese” - and then stop, assuming the lease conforms to what they were told by the leasing agent.

 If you cannot understand the lease, spend the money to hire an experienced lawyer who can tell you what the terms of the lease mean.

Although there is an upfront cost to using a lawyer for this, it is essential that you are aware of your rights and duties under the lease and that the lease incorporate the verbal promises made by the leasing agent.

 If it is not in writing, you will not be able to enforce the promises made to you by the leasing agent.

There are a number of provisions that you should be aware of.

 • Know your total cost. In many commercial leases, the tenant pays a base rent amount per month, plus a portion of taxes, insurance and maintenance of the building and its common areas.

In a shopping center lease or in a lease to a restaurant, there may be additional payments required that are a percentage of the tenant’s gross sales.

• Know the building. You should know how old the building is and when major repairs to heating and cooling systems, the roof and common areas were last completed. Otherwise, you may be surprised by a bill for your share of work on these items.

• Know who’s responsible. The tenant named in the lease should be your business entity, which is the party responsible for making the lease payments.

 As a newly formed business with no track record, the landlord may ask you to personally guarantee the lease. This means that if the business fails, the landlord will expect you to pay the lease for the rest of its term, which could be a substantial amount of money. Your lawyer might be able to help negotiate better terms than a personal guarantee, especially if you have owned a business in the past.

 • Know your neighbors. If the property you want to lease is in a mall or a shopping center, you may be concerned about whether the landlord rents space to a competitor.

If your business requires peace and quiet, you may need to bolster the provision allowing for your “quiet enjoyment” of your leased space, to allow you to terminate the lease if the landlord rents to a noisy neighbor.

• Know your financing. If you are a franchisee, you should not sign a lease if you have not finished your financing, bought your franchise or finished the purchase of your new business. There is no fun in making lease payments for a business you don’t have.

 If the landlord insists you sign the lease, your lawyer will need to insist on language that includes a contingency for financing and a contingency for the completion of the business or franchise purchase. 

 



Repossession

The basic concept of leasing autos is very simple. Most of the automobile customers are not aware of it and are often skeptical about leasing their vehicles. The concept of leasing autos is misunderstood and clever dealers often take the advantage of this misunderstanding and use it to make extra money.

There are various experts, who provide advice against leasing autos. These experts convince people that leasing autos is similar to renting autos. These experts use this strategy as a quick method to promote their businesses.

Many people believe leasing vehicles is the same as renting them, which is not true. Some people do not have any knowledge about the leasing procedure and few people take illegal advantage of this lack of knowledge.

Advantages Of Vehicle Leasing:

There are many advantages of leasing a vehicle. It is also an excellent substitute to purchasing an automobile. Some of benefits are as follows:

1. Low monthly installments: You pay for a small portion of the vehicle that you use. Thus, the monthly installments are very low in comparison to the purchase loan of the same auto.

2. More vehicles, Very often: As the monthly installments are very low, you have the flexibility to change your vehicle at the same price in every four years, which depends on the term and length of the lease.

3. Less maintenance headaches: Most people play it safe by choosing a term, which coincides with the warranty period of the vehicle. In this way, the repairing cost is covered, as it comes under the warranty.

4. Most of the leases require no or little down payment. This makes purchasing a new vehicle very affordable and you have some cash remaining to make some more purchases. However, you may decide to pay down payments or use the old vehicle to lower the monthly installments too.

5. Low taxes: In some parts of the Unites States and Canada, you do not have to pay sales tax on the entire amount on vehicles on lease, in comparison to vehicles you purchase.

6. No hassles of used-car: With the leasing process, you are free of hassles such as selling used automobiles. You simply need to return the vehicle to the company you bought from. You always have an option of purchasing and trading the vehicle later in a vehicle leasing system.

Other Things To Remember:

The key to intelligent vehicle leasing is to understand the process of leasing. Do not take decisions in a hurry. Learn how to use leasing as a benefit and not as a disadvantage.

If you do not have the basic concept of leasing automobiles, you are bound to make mistakes. Sometimes you may end up with overpayment or even become a part of a cheating process unknowingly.

It is a process of financing similar to loans. You will be committing the biggest mistake, if you assume leasing automobiles is similar to leasing house or renting an apartment. Do not attempt to proceed with leasing a vehicle without any knowledge regarding the same. This will only lead to great trouble.



Sell and Rent Back

So you already have in mind the car model to lease. The next thing to do is look for either an independent leasing company or a dealer’s financing. A regular dealer has a captive finance source which is usually the manufacturer’s financial company, like the BMW Financial Services, Honda Motor Credit, General Motors Acceptance Corporation (GMAC), or a major national bank such as Chase Manhattan.

Some dealers use alternative sources such as another financial company or a major national bank like Wells Fargo or Chase Bank. So what is common practice is that the dealer chooses the right source wherein it can benefit from.

On the other hand, independent lease companies have no financial obligation to any manufacturer financing source but work with dealers anywhere in the country. Most independent lease companies also handle preowned cars until 3 to 4 years old.

Conventional dealers have their own set rates and some have the best lease deals but only for a limited period. The best lease deals which are very hard to beat are those cars that have subverted money factors and residuals from factories.

The good thing about independent lease companies is that they can offer impartial, professional advice on car selection regardless of make and model. The reason for this is because they are not tied to a single manufacturer or financing source, not like the regular dealers who have stick to specific models.

They are free to negotiate with you the lease terms like the residual value and mileage of the leased car.

That’s also true when you’re after a more personalized customer service with your leasing agent.

One customer has this to say about an independent lease company:

“I used your Lease Guide to check out deals and do research on the car I wanted to lease. I also found and contacted PrimeLease.com as a outside lease company by using your site. Using the invaluable information on your site and the help of PrimeLease I was able to save $1000 on total price and $60 dollars a month in payments. I will refer your site and PrimeLease to all my family and friends!”

S. Kuberry

In the end, the choice is still yours to make.

Source: http://www.car-leasing-help.com

http://www.leaseguide.com

More information on best car lease deal options and vehicle reviews can be found at the Car Leasing website.



Repossession

We can’t control everything in life. If you are driving a leased vehicle, you may have unexpected circumstances that prompt you to leave your lease early, and not finish the lease agreement. If you need to get out of a car lease, you do have a few options, but it is something you want to consider carefully.

When you lease a vehicle, one of the benefits is the low monthly payments. Part of the trade-off is the agreement to keep the car for a specified period of time. Because of depreciation, it is not in the leasing company’s best interest for you to return your car early. Don’t expect to walk into the leasing company, drop off the keys, and be done with it. Usually, the leasing company will require you to pay all of the remaining lease payments that are due on your contract, plus an early termination fee. You’ll still be paying for the privilege of driving the car, even if you return the vehicle. Most of the fees and penalties for early termination are found in your lease agreement. Its a good idea to get clear on those terms before you even take out the lease, and if you are considering breaking your lease, you will want to review the terms of the contract first.

One thing you don’t want to do is just return the car and refuse to pay. Your credit report will be negatively impacted, and the whole transaction will be listed as a repossession on your credit. In many cases, there are more attractive and viable options then returning the car and paying all of those extra fees, or taking a hit on your credit.

One option is to sell the vehicle yourself, and then use that money for the buy-off amount of the lease. You will want to do some research, and see what you could reasonably get for the car if you sold it to a third party. If its a similar amount to the buy-off amount, you could sell it, and then pay off the lease. This way, you will protect your credit, although you may still have to put in some of your own money, if there is a difference between what you sold the car for, and what you still owe.

Another option is to transfer your lease to a third party. This is called a lease assumption, and another individual takes over your lease, they handle the remaining payments, and return the vehicle at the end of the lease. This is a great option because you won’t have any penalties and once the lease is transferred, no responsibility toward the leasing company.

However, there is a variety of paperwork involved, and everything needs to be handled correctly for the lease assumption to be valid. Your leasing company will need to be involved, and needs to approve the transaction. The best way to find a third party, and have the transaction done properly, is to use one of the specialized companies that help lease buyers find lease sellers. These companies have websites where you can advertise your vehicle and lease terms to interested buyers, and they will process the paperwork and guide you through the transfer process. Of course, there will be a fee involved for the service, but it will be usually be less than what you would pay in lease termination penalties.

Terminating an auto lease can be more complicated and costly than starting one. Its important that you review the lease contract carefully, and take a look at your options before you make a decision on how to get out of your car lease. In many cases, a lease transfer option may be the best deal, but only if your leasing company allows a lease assumption.



Real Estate Professionals

Although you may not feel it right now, the looming economic crisis has already stretched out its claws and has scratch the surface of even the most stable industries in the world. This is why lease takeover transactions are becoming more and more popular today among car buyers and car owners. This transaction for purchasing a car is not necessarily exclusive to car owning and buying—after all, lease transfers or lease takeovers are also common among other type of properties. However, cars are more accessible (there are more car owners than homeowners, after all) in terms of price and utility, hence the popularity of lease transfer transactions. Many buyers and sellers are hesitant to enter into this kind of transaction, since they are easily intimidated with lease procedures. However, at its very core, a lease transfer is simple—and practical.

Definition

But what exactly is a lease transfer? Simply put, this is a transaction where an individual who bought a car on a lease will sell his or her property to other interested individuals. This process is differentiated from the mere selling of a car because the lease here has not been paid by the original owner. In short, the new buyer will pay for the remaining lease payments. The seller is transferring the lease to another owner, while the buyer is assuming responsibility for the lease. Obviously, this process works both for the seller and the buyer.

Advantage and repercussions

Remember that the original owner of the car is under contract. This contract would require the owner of the car to pay a lease cancellation fee if the request for one is approved. While this procedure may seem more convenient, the penalty for lease cancellation can usually equal to the total amount one would pay for the original lease itself. Needless to say, for someone who needs to get out of a lease, a lease transfer is a better option. Those looking to buy a car on a lease takeover, on the other hand, would enjoy cheaper car prices. The new buyer will no longer have to pay for the previously paid fees; he or she is merely responsible for the unpaid dues. Of course, as with most transactions, there are also a number of repercussions, mostly on the side of the buyer. Taking over a lease is just like buying a second-hand car; the property may no longer be in a pristine condition. Nonetheless, a lease transfer is an effective way to get out of a lease legally and practically, and also a safe and cheap source for perspective automobile buyers.

Choices

Lease transfers give buyers and sellers options. With this, they are no longer stuck with unfavorable set-ups and can choose not to be bound by ruthless contracts. This gives people the choice to pick the most suitable option of buying and selling cars. In a time when financial matters should be taken very seriously and given much thought, it is about time people give lease transfer procedures a chance.



Quick House Sale

A commercial lease agreement is a contract that legally binds the property owner and the tenant. The lease agreement gives the tenant the right to use the property for commercial purposes for a certain period in exchange for money paid to the property owner.

The lease agreement also provides an outline of rights and responsibilities of both the tenant and the proprietor.

What is the subject of the commercial lease agreement?

Commercial lease agreement involves the lease of real property for commercial purposes. It usually covers the lease of a store, offices, industrial and commercial buildings.

Is there a standard form for Commercial Lease Agreement?

Unlike other contracts, commercial lease agreement has no standard or required form. The law is silent with regard to this aspect. The party can use any form as long as the basic element of the lease agreement are present.

What are the basic elements of commercial lease agreement?

• Property address

• Start and termination dates

• Names of all parties involved including their signatures

• Rental amount and complete detail of all deposits

• The names of the landlord and tenants and other parties involved and their signatures

• Interval of payment

• Provision of lease renewal

What is the difference between commercial leases from a residential lease agreement?

A commercial lease differs from residential lease on its purpose. Commercial lease is used by a tenant to rent space for business purpose while a residential lease is used by a tenant to rent a home or space to reside in. The parties in a commercial lease agreement have a greater negotiating and bargaining power from the parties in a residential lease agreement.

Is oral lease agreement sufficient?

An oral lease agreement is sufficient and valid between the parties. However, it does not bind third persons.

Courts also prohibit oral lease agreement because it is difficult to enforce. In cases of dispute, courts have no reference as to the contents of the agreements.

It is had to determine who the party at fault is.

Is there a maximum period for lease agreement?

The lease agreement may exist for any length of time. It may be for a short period, which will last for a year or less and for a long term to last for three years or more.

A long-term lease tenant is required to pay periodic increases in their monthly rent. The increases are provided as compensation for owner due to rising amount of insurance, property taxes, common maintenance and other utilities.

Parties in a Lease Agreement

A lease agreement has two parties such as,

• The lessor or the property owner

• The lessee or the tenant

The lessor is the owner of the property and the lessee is the one who uses the property for a certain period in exchange for a compensation called rent.

What law governs commercial agreement?

Since commercial lease agreement involves real property, the law of the place where the property is located will governed.

The commercial lease agreement is governed by the law of the place where the property is located, regardless of the jurisdiction of which jurisdiction the property owner and tenant resides.

If you have encountered any legal problems regarding your Commercial Lease Agreement, do hesitate to consult our expert Los Angeles business lawyers. Just log on to our website and fill out our free case evaluation form.



Quick Property Sale

With recent turmoil in the financial markets, business owners are looking for ways to save money and improve cash flow.  One area they should consider is equipment leasing, rather than buying outright. When budgeting for your business, equipment leasing can provide some attractive benefits.  According to the New York Times, cash-starved companies are smart to consider leasing, rather than purchasing equipment.  By leasing you can have access to almost anything you might need for your business: computers, office furnishings, trucks and much more. 



Keeping up with technology

Leasing arrangements can help businesses keep up with ever-changing technology.  Even after only one year in use, much technology (such as computers) may need to be replaced by a newer, improved version. A leasing arrangement helps many businesses with the cost of continually buying new pieces of equipment to accommodate changes in business needs.



Tax Benefits

One benefit of leasing, depending on the lease structure, is that the monthly payments may be treated as a tax deductible business expense.

Cash Flow

Companies that rely upon cutting-edge technology such as communication devices, vehicles, or other equipment will find a big advantage to leasing.  A series of short-term leases will often cost you less than replacing the equipment every year or two.  Some leases even have yearly upgrades built into them, eliminating the need to pull the cash together for an equipment upgrade.

Choosing a Leasing Company

With the economy slowing and many lenders cutting back on access to credit for buyers, it is a challenge to know if leasing is right for your business.  You may need to search harder for the right partner to provide your lease. 

For early-stage businesses, equipment lease financing is more easily obtained from a company such as Advantage Leasing than from a bank. When you choose a company such as Advantage Leasing, you may find that leasing is easier to obtain than you might think.  Their capital base allows them to retain leases in their own portfolio. This enables them to offer customers very competitive rates, great flexibility in lease structure, and personalized service.



Rent Back

Triple net leases are becoming more popular in the Houston area. Here, they are obviously less expensive for the property owner, and can allow a truly passive form of income for the property owner. With one of Houston’s triple net leases, a property owner can be hands off, which is exactly what more and more property owners are looking for. Of course, there are down sides to them as well.

Most triple net leases give control of the property to the lessee, which can be either a good deal or a bad deal, depending on who the property owner is dealing with. They provision the renter to pay for maintenance as well as other costs associated to property ownership.

Before ever purchasing one, potential owners should have these leases looked over by a Houston real estate attorney to be assured that the property owner can still control structural changes to the property as well as enforce the general maintenance that the property requires.

While a property owner can simply go online and download a lease agreement, these leases in particular can work against the owner of the property. Legally speaking, it is very difficult for a property owner to deny liability for destruction of property, especially if they are being held accountable by a third party. A well written, clear and concise lease can help avert such situations.

Every triple net lease property for sale in Houston is going to vary at least in structural repair requirements. Many of them require the tenant to pay for everything except roof repairs while some require everything including roof repairs. A bond clause requires the tenant to pay for the property even if the property doesn’t exist anymore, such as the loss resulting from fire, flood, earthquake, or other natural disasters.

Triple net leases are a hard sell for potential tenants, regardless of whether you are referring to residential tenants or commercial tenants, and there has to be a motivation for the tenant. There is an exceptional amount of negotiation associated with them, and potential purchasers should yield to caution when entering a pre-existing lease.

Leases for sale with huge profit potential can be difficult to find. They take a bit of cultivation, and a bit of finessing to create the perfect situation. If the tenant of a triple net lease is not worthy of the sale, the sale will often never materialize.

Both the landlord and the tenant can benefit from a triple net lease and can experience great frustration from them too. Keeping in mind that the tenant who agrees to one needs to get something out of it, purchase of a triple net lease in Houston can lead to more pitfalls than necessary if the situation hasn’t been scrutinized.

In most cases, residential leases in Texas are rare. It costs too much money. The only notable exception to that rule refers to some apartment buildings, usually units that house between 6 and 12 units. These can be an acceptable alternative to home ownership under the right circumstances. The vast majority of triple net properties in the area are commercial properties.

Finding an ideal triple net lease for sale in Houston or the surrounding area can be considered an impossible task. Because they are unique between landlord and tenant, most ideal situations are created rather than purchased. Those leases which are up for sale are often good situations, but a potential owner is hard pressed to find a perfectly ideal situation unless they have created it for themselves.

Creating one and then selling it can be ideal for those looking for a high end real estate business. Some of these leases are signed for as long as 50 years, offering up some very tempting terms for a potential buyer. After all, provided that the lease is signed for an extended period of time, the lease can provide a significant income-expense ratio for the owner. Additionally, the resale of one can also bring in revenue.

Anyone considering purchasing a triple net lease for sale in Houston should never consider the purchase without the assistance of an attorney for the simple reason that these leases are personalized per situation.

A great find will still be a great find after a lawyer looks over the lease. A good find can turn into a great find after an attorney evaluates the lease. Then of course, a lawyer can save you much headache and pain when it comes to a triple net lease that shouldn’t be touched with a single dollar.



Quick House Sale

by Tom Williams

Savvy business owners who choose to lease business equipment can save themselves hard-earned cash, accumulated debt, and industrial-strength headaches by optimizing their relationships with lending entities.

Customers who are looking to lease equipment for their business most frequently seek financing from one of two sources – traditional bank financing programs, or specialized leasing companies like eLease. The following are four key differences to consider when comparing these programs.

1. Interest Rate Fluctuations

In a healthy economy, banks often choose to offer equipment leasing as a service for their business clients. In this way, banks foster economic growth in local communities by supporting expansion in growing industries. However, banks are not in the business of taking risks, and because of this, their programs are subject to change as current economic conditions falter.

An example of this is interest rates. Consistent with their conservative risk philosophy, banks do not entertain risk with interest rates. Typically, bank lines fluctuate on the Prime Rate — as the Federal Reserve raises or lowers the rate, so will your interest payment increase or decrease. These economic fluctuations can have financial impact on your business outside of your control.

The opposite is true for leasing companies, because they take 100% of the interest rate risk. Therefore, when industry rates decrease or increase, your lease payment stays the same. The payment on a lease will never change during its term regardless of interest rates and inflation. You know what you are getting from day one.

 

2. Impact on Additional Financing

The way that your financing source reports your leased business equipment with the Secretary of State can directly impact your ability to obtain additional financing for your business.

When your business equipment is financed by a third-party leasing company, that company files a UCC (Uniform Commercial Code) which specifies to the Secretary of State where the customer is located, and that the leased equipment is owned by the leasing company. For example, if your business makes the decision to lease an oven for your new restaurant, a leasing company would designate the oven itself as collateral.

In comparison, all property owned by the business is stated when a bank finances the lease. A Blanket UCC is usually filed, which includes the equipment as well as all assets. Therefore, not only would the oven for your new restaurant be considered collateral, but so would your entire business.

When a blanket UCC is in place, other banks will not want to provide overlapping financing with another lender. If, however, your financing is provided through a third-party leasing company, other lenders will see that only equipment is under consideration, and be favorable to loan financing because they will be able to Blanket UCC the rest of the business.



3. Access to Capital

Both banks and leasing companies evaluate exposure (the total amount of debt taken on by a company) when considering whether to offer financing. The difference in the way these entities look at total debt can have significant influence on their decision to finance your equipment, as well as other financed assets.

In most cases, banks have a borrowing threshold with a borrower. This may include the line of credit on the home, auto loans, credit cards, business debts and personal mortgage. If you get into an amount of debt that the bank sees as a risk, they may choose to end business with your company. Or, they may refuse you financing due to how much debt your already have.

Leasing companies deal with the same issue, but only consider the equipment financed for that customer. So, by using a third party leasing company, you can retain access to capital with your banker without tying up credit lines. A business can never have too much access to capital!



4. Flexibility in Terms

Most banks are highly structured and cautious in their leasing terms. Frequently, they require 10% to 20% down to finance equipment for a business, with a requirement of security such as a minimum amount in a CD, or reserve in a checking account.

While the primary objective of a bank is to protect its interests, a leasing company’s main goal is to generate cash flow. Therefore, leasing companies are highly creative in finding the easiest way for a business to get new equipment. It is not uncommon to terms that include seasonal payments, or no payments for 90 to 180 days.

 

In summary, a good rule of thumb is to use your bank for working capital, and equipment finance companies to finance equipment.

 

 



Sell and Rent Back