Equipment Leasing: A Simple Guide for Business Owners
Leasing is a convenient, affordable way to help businesses of all sizes acquire high-quality equipment they might not be able to purchase outright. But if you’ve never leased equipment, it’s natural to wonder how the process works and what specific benefits leasing can deliver to your business. Below is a look at the top benefits of equipment leasing and the key to a successful equipment leasing experience.
How does the equipment leasing process work?
The path to a smooth equipment lease begins with a clear understanding of how the process works. The process typically begins when a person or business (ultimately the lessee) needs one or more pieces of equipment. In many cases, the equipment needed is costly – sometimes carrying a value of $1 million or more. In a nutshell, there are three primary reasons why a lessee may decide to lease equipment:
- Scenario 1: The lessee needs the equipment indefinitely but is not able to afford to pay cash in advance
- Scenario 2: The lessee needs the equipment for a specific period of time and is not interested in long-term use
- Scenario 3: The lessee is interested in acquiring the equipment with the option of purchasing it at the end of the lease
The leasing company typically pays the equipment provider in advance and the equipment is delivered to the lessee according to negotiated terms. The lessee then makes affordable monthly payments to the leasing company throughout the course of the lease. At the end of the equipment lease, the equipment is either returned to the supplier or purchased at a negotiated rate.
What are the steps involved with a typical equipment lease?
No two equipment leases are exactly alike. However, there are some basic steps that are followed in virtually every equipment lease. Depending on your financial health and the leasing company you select, your application could be approved and your equipment delivery confirmed within just a couple of days. Here are the key steps involved in a typical equipment lease.
Step One: Make a list of the equipment you need
If you are considering an equipment lease, you likely have an idea of the equipment you need and the approximate cost. But it’s best to be as specific as possible with equipment suppliers to avoid confusion. As you prepare your list, be sure to include the following:
- The equipment or machinery you need
- Your preferred manufacturer and model
- The quantity of each item you need
Step Two: Request a quotation from a reputable equipment provider
Depending on your industry and the equipment on your wish list, you could be looking at a multi-million dollar transaction if you were to purchase the equipment outright. Most equipment leasing companies will want to review your estimate, so make sure you request a formal quote that includes the following:
- The delivery address of your facility
- A signature of the company representative
- An expiration date
- Any additional fees
Step Three: Select a trusted equipment leasing company
Not all equipment leasing companies are created equal. As in the case of equipment providers, leasing companies vary greatly in terms of their service, funding abilities, and reputation. As you evaluate leasing companies, look for a company that offers the following:
- The ability to issue payments to equipment providers quickly
- A history of positive reviews from clients
- The ability to make multi-million dollar payments or loans
- An excellent rating by the Better Business Bureau (BBB)
- Access to a variety of funding types in case you wish to explore other options
Step Four: Complete an application
Today’s equipment leasing companies make the application process fast, straightforward, and convenient for prospective clients. It is not uncommon for leading companies to have a short one-page equipment lease application that can be completed online in a matter of minutes. You might be asked to provide some basic documentation along with your application. The documentation requested will depend on the type of business you own and the value of the equipment.
Step Five: Receive approval
If you are working with an efficient leasing company, you can expect to receive approval or feedback on your application within 24 hours. And if you’ve selected a top-tier company to handle your lease, your first lease payment could be remitted the same day you are approved. This means you could have the equipment you need in hand faster than you ever imagined.
What are the top benefits of equipment leasing?
Many people are surprised by how straightforward and easy it is to lease machinery or equipment. In fact, the simplicity of the leasing process is a major reason why many business owners and operators decide to lease again in the future. Here are some other benefits of equipment leasing:
1) Flexible terms and equipment options
Flexibility is one of the many advantages of an equipment lease. You can negotiate the length of your lease to suit your needs and work with your leasing company to arrive at monthly payments you can afford. Additionally, you have a lot of latitudes to choose your favorite equipment brands and models.
2) You may opt to purchase the equipment at the end of your lease
Some lessees find that they don’t want to part with equipment as the end of a lease term approaches. In some cases, employees grow comfortable using leased machines, and some business owners find that their productivity skyrockets after new equipment is introduced. So whether you wish to avoid disruptions to your operations or simply wish to keep the equipment you have grown accustomed to using, you can often negotiate a purchase at the end of your lease.
3) Your maintain a healthy cash flow
Healthy cash flow is the cornerstone of growth for many companies. Leasing a device for a few thousand dollars instead of forking over $100,000 to purchase it outright can help you keep plenty of cash on hand. This cash can be used to fund special projects, expand your product line, or hire new employees.
4) You don’t have to stress about service
Service woes and equipment breakdowns are two of the woes of owning equipment outright. Grappling with equipment repairs can be costly, and equipment problems may even halt your productivity. But with most equipment lease agreements, you aren’t responsible for equipment servicing. So, if a machine you are leasing breaks down or requires maintenance, the equipment provider must repair or replace the item quickly and at no cost as your lease agreement specifies.
What are some common examples of situations that call for equipment leasing?
With leasing offers so many enticing benefits, you may wonder whether it is the best option for your business. As you compare leasing with other financing options, it’s helpful to consider some of the unique ways leasing can help you meet your revenue goals. Here are some examples of situations when equipment leasing makes sense:
1) Your business is a startup or in the early phases of growth
Startups and new businesses rarely have much excess cash on hand. However, many begin generating substantial revenue after being open just a few months. By offering manageable monthly payments, leasing is a good choice for growing businesses.
2) You would like to offer special medical services
Equipment leasing is quite common in the healthcare industry. Capital medical equipment can cost hundreds of thousands of dollars, making procurement a challenge for budget-conscious facilities and doctors starting their own practices. Here are some ways leasing can help healthcare providers:
- Equip temporary pop-up or mobile clinics: Leasing is a great option for healthcare practitioners seeking to open
- Procure high-ticket equipment: Obtaining a costly MRI machine, CT scanner, or mobile x-ray unit becomes more affordable with leasing.
- Ease startup costs: Leasing can help newly licensed doctors and dentists equip their practices without breaking the bank.
3) You need to prepare for peak season
Many businesses depend on revenue from their peak seasons to carry them through the remainder of the fiscal year. And there are few things more frustrating than being unable to deliver service or products when you have the staff but lack the machinery necessary to meet increased production demands. Leasing provides you with access to the equipment you need without destroying your budget.
What is the key to your satisfaction with equipment leasing?
Clearly, equipment leasing offers a host of benefits to businesses in many industries. But why are some leasing experiences picture-perfect while others leave something to be desired? The answer often lies in the leasing company you work with.
The key to your satisfaction is to select a five-star equipment leasing company that is professional, efficient and focused on helping you secure the equipment you need as quickly as possible. As a leader in the equipment leasing industry, Moby Capital is here to guide you through the equipment leasing process. We offer a level of responsiveness that is second to none and have a proven track record of success working with capital equipment suppliers across a variety of industries.
To move forward today, contact us by email at email@example.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization!