Equipment Financing

Saving Cash for Small Business Equipment

Everybody in business is aware of just how tight cash is these days. Credit is even tighter, and this has caused many companies to delay critical expansion and vital equipment purchases. The odd thing is that small business equipment can be financed via several different methods and one of them, leasing, has been the go to solution for small, cash sensitive companies for years. Many companies still have misgivings about equipment leasing that stem from fears regarding lack of ownership rights. If you consider for a moment, buying equipment outright will usually involve credit and if the company has a difficult time, the equipment and the firm's credit rating can be lost. With equipment leasing options, this is less of a factor and as business grows, upgrading to better equipment is much easier and, best of all, keeps cash safe.

Cash flow is king in business. Shelling out tens of thousands of dollars for new computers, servers or security systems can hurt. Those same expenditures can be pared down to a first months lease cost plus a security deposit, and the equipment is on site and working in a few days. The options regarding leasing equipment for small businesses can be very advantageous.

Three basic terms will be encountered including Fair Market Value (FMV), 1% and 10%. These describe the buy-out option typically offered at the end of the lease. Usually, FMV is the most advantageous option for realizing the lowest monthly payments. The larger the buy-out price is, the lower the payments. The terms usually extend from 24 to 60 months, which can also affect the monthly cost. Credit can be a factor but leasing companies are less sensitive to this, as the equipment itself minimizes their risk.

The simple fact is that most equipment, particularly computer equipment, will become obsolete as new technology develops. This allows lessees to capitalize by getting equipment on a short term lease, such as 24 or 36 months, and opting to upgrade to new leased equipment rather than purchasing the original equipment. Doing this entails no bulk cash payments and only the modified monthly cost to deal with. Best of all, you get to use the latest equipment to drive the business. Computer equipment is the easiest example, but many companies use leasing for business telephone systems, retail equipment such as cash registers, Point Of Sale systems, or inventory equipment, as well as vehicles. The latter a vehicle dealerships would arrange, but under somewhat different conditions.

Difficult times call for creative and clever solutions. Often, the tried and true methods are the best and business equipment leasing is one of them. If the opportunity to grow is there, whatever is necessary to capitalize on it should be considered. With small business equipment, leasing is a safe and financially advantageous means of achieving those goals. Do not say "No" before you explore all the options.