Friday, February 6, 2009
Is Equipment Leasing Right For You?
Running a business can mean that money is tight - especially when it comes to purchasing new equipment that the business needs to be successful. More and more companies are now leasing the equipment that they need, especially when it comes to high-end equipment that is expensive and requires a big investment on the part of the business.There are many benefits to leasing the equipment that you need for your business. The most beneficial aspect of leasing in lieu of buying your equipment is that leasing does not interrupt your cash flow. When you lease equipment, you can use the money that would have been spent to purchase the equipment for other purposes.Leasing needed equipment gives you purchasing power. Because it costs much less initially to lease a piece of equipment than to buy it outright, you can select from more modern models that have more features and better brands that are more durable and do a better job.Most equipment is leased with one hundred percent financing, so there is usually not a need to pay anything down. However, if you have damaged credit, you may be required to make some type of down payment. The term of the lease can be adjusted for the needs you have - either in months or years. This will eliminate the need for purchasing equipment that you don't use in the long run.When you lease your equipment, all maintenance risks are usually covered by the owner of the equipment. This can save you thousands if your equipment malfunctions or requires repairs that are not covered by warranty. Some leasing companies offer general maintenance of the equipment that you lease as well, all covered under your leasing agreement. You will also have the ability to keep up with technology and acquire equipment that is updated by upgrading your lease.Money spent on leasing your equipment offers you the chance to deduct up to one-hundred percent of your leasing payments as business expenditures when you file your tax forms each year. This can add up to substantial savings over the life of your lease.With a vast number of leasing companies available to service your needs, you should be able to find one that offers the flexibility that you require in leasing options. A large percentage of most equipment is acquired through leasing because of the savings that can be realized both immediately and in the long run.In sum, businesses require the ability to be flexible, which may mean upgrading equipment very frequently. Leasing equipment can be an affordable solution to allowing your business to stay on the cutting edge of the industry and allow you to meet performance goals and remain competitive. By investing just a fraction of the cost of purchasing equipment into an equipment lease, your business can hold on to more of its working capital to raise its bottom line and look better on balance sheets. With so many options available for leasing quality equipment, it makes perfect sense to lease, rather than buy, equipment for your business.
Car Leasing
Many people wonder if car leasing
is right for them. Before you make a decision about leasing or buying cars, you should know something about leasing car and how the process works. Leasing cars means that you are going to pay the amount the cars depreciate during the time you are in control of them. When you are leasing cars, you do not own them, and when you turn them back in, you will have, in theory, paid for the value that you used. The difference between the value of the vehicles when they were new and the value at the end of the car-leasing contract is called depreciation, and depreciation determines how much leasing cars will cost you.What is unique about leasing cars is that different cars have different rates of depreciation, which means they are have different leasing costs. American cars, for instance, tend to have a higher rate of depreciation than cars of European and Japanese makes. This means that if you are going to lease a car, you might want to look for a foreign-made model if you want to save some money. If you are considering leasing cars, whether it is for your business or for your personal use, you will generally be able to drive a much newer car for a much lower monthly cost. This is a great option if owning the vehicle at the end of the process is not important for you. Leasing cars is a great option as well for those people who want to have newer, more reliable vehicles at all times. When the lease is up, you simply turn the car back in and shop around for a new car to lease! That is the beauty of car leasing!Advantages of Leasing CarsLeasing cars for my business offered me the tax advantage of not paying the hundreds of dollars in taxes a purchase would require. What's more, I can deduct a portion of the lease installments as a business expense. Plus, The monthly payments are 30-50% less than a loan for the same fleet.Most lease agreements coincide with the manufacturer warranty so I don't have to worry about costly mechanical repairs because nearly everything is covered. Another advantage of leasing cards is that I can return a vehicle after using it for a few years and pick up a newer model. I won't lose equity in the vehicle and I'll never owe more than it's worth thanks to the included gap insurance. Disadvantages of Leasing CarsThe main disadvantage of leasing cars for my business is the mileage limit. If I exceed the allowed mileage during my lease period I'll be penalized up to $.39 per mile. I will also be charged for any damage or changes made to the leased vehicles. Before making any final decision, you should do what I did, weigh the cost of a loan and the long-term benefit of asset ownership against the cost of lease payments and tax and maintenance savings. Only then will you know whether it's better to buy or to start leasing cars for your business.
is right for them. Before you make a decision about leasing or buying cars, you should know something about leasing car and how the process works. Leasing cars means that you are going to pay the amount the cars depreciate during the time you are in control of them. When you are leasing cars, you do not own them, and when you turn them back in, you will have, in theory, paid for the value that you used. The difference between the value of the vehicles when they were new and the value at the end of the car-leasing contract is called depreciation, and depreciation determines how much leasing cars will cost you.What is unique about leasing cars is that different cars have different rates of depreciation, which means they are have different leasing costs. American cars, for instance, tend to have a higher rate of depreciation than cars of European and Japanese makes. This means that if you are going to lease a car, you might want to look for a foreign-made model if you want to save some money. If you are considering leasing cars, whether it is for your business or for your personal use, you will generally be able to drive a much newer car for a much lower monthly cost. This is a great option if owning the vehicle at the end of the process is not important for you. Leasing cars is a great option as well for those people who want to have newer, more reliable vehicles at all times. When the lease is up, you simply turn the car back in and shop around for a new car to lease! That is the beauty of car leasing!Advantages of Leasing CarsLeasing cars for my business offered me the tax advantage of not paying the hundreds of dollars in taxes a purchase would require. What's more, I can deduct a portion of the lease installments as a business expense. Plus, The monthly payments are 30-50% less than a loan for the same fleet.Most lease agreements coincide with the manufacturer warranty so I don't have to worry about costly mechanical repairs because nearly everything is covered. Another advantage of leasing cards is that I can return a vehicle after using it for a few years and pick up a newer model. I won't lose equity in the vehicle and I'll never owe more than it's worth thanks to the included gap insurance. Disadvantages of Leasing CarsThe main disadvantage of leasing cars for my business is the mileage limit. If I exceed the allowed mileage during my lease period I'll be penalized up to $.39 per mile. I will also be charged for any damage or changes made to the leased vehicles. Before making any final decision, you should do what I did, weigh the cost of a loan and the long-term benefit of asset ownership against the cost of lease payments and tax and maintenance savings. Only then will you know whether it's better to buy or to start leasing cars for your business.
When and How to Get Construction Equipment Leasing
Construction Equipment Leasing is a type of leasing arrangement where a small business owner (like you) would like to get Construction Equipment but at a lower cost than when you buy the Construction Equipment yourself. It falls under the broader category of Equipment Leasing which means that the equipment you want to lease is probably very expensive (and Construction Equipment are extremely expensive) but you cannot rationalize buying the equipment because you might need the equipment only for the short-term or you lack the capital for outright purchases.The usual lease period for Construction Equipment Leasing starts at the 24-month term and could last as long as a 48-month term. Usually, Construction Equipment Leasing will not require you to make a hefty down payment though you may be required to give a security deposit of some amount. This allows you to use more of your cash flow for your business needs and to save up. However, for long-term purposes, it is not advisable to use the Construction Equipment Leasing option – rather, a cheaper option for the long-term loan option is bank financing itself. Construction Equipment Leasing is ideal for short-term needs only.Construction Equipment Leasing may fall into three main categories – namely the capital lease, the operating lease, or the skip lease. The capital lease (also called a finance lease) acts like a regular loan and will last about as long as the actual lifespan of the Construction Equipment. If the Construction Equipment is in good working condition at the end of this lease term, the capital lease allows you to take advantage of the stipulation to buy the same Construction Equipment you have been using for your company. The operating lease (also called a true lease) lasts shorter than the life span of the Construction Equipment and will usually use up less of your business cash flow. You may find payments for the operating lease to be tax deductible (but you’ll have to check the agreement you are entering if this applies to you.) A skip lease is ideal for any seasonal business where income usually flows in only during specific months in the year (rather than year-round like other businesses.)When it comes to Construction Equipment Leasing, you may get yourself a better deal if you go straight to the Construction Equipment manufacturers. The larger institutions are also known to do this more commonly than the smaller ones. The best way to find this option is to go online and look for any links to “leasing options.” As with any financial transaction, do not snatch up the first offer you get. Rather, try to look around the market and see if there are any Construction Equipment Leasing companies that can give you a better deal under the same leasing terms. It is equally important to find out if you are in for any tax breaks if you pursue Construction Equipment Leasing for your company. This can be confirmed by your company accountant.
Auto Leasing: How To Get Out Of A Car Lease
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.
Business Leasing
Having just completed the Canyon Leasing Training program I am embarking on building my own Leasing Company. In hopes of developing relationship with small business the acquire equipment I have outlined the benefits of leasing in this article.
While 80% of all US businesses have leased equipment at one time or another, some may not be aware of the benefits, nor of the hidden costs involved with leasing. Sometimes leasing equipment, instead of buying it, can be the best option for your business. However, there are many variables that should be considered, including costs, use restrictions, and legal implications.
Leasing operating equipment, such as computers, vehicles, and machinery, often makes more sense than buying. However, while favorable leases are often good bets, unfavorable ones can easily sink an emerging venture. While doing your legal homework can help prevent bad deals, it's always a good idea to have a lawyer look over a lease before signing it.
Benefits of Leasing Equipment
1. Leasing is Flexible.Companies have different needs, different cash flow patterns, and sometimes irregular streams of income. For instance, startup companies typically are characterized by little cash and limited debt lines. Mature companies might have other needs - to keep debt lines free, to comply with debt covenants, and to avoid committing to equipment that may quickly become obsolete. Therefore, your business conditions - cash flow, specific equipment needs, and tax situation may help define the terms of your lease. Moreover, a lease provides the use of equipment for specific periods of time at fixed rental payments. Therefore, leasing allows you to be more flexible in the management of your equipment.
2. Leasing can be Cost-Effective.Equipment is costly and some of the costs are unexpected. When you lease, your risk of getting caught with obsolete equipment is lower because you can upgrade or add equipment to best meet your needs. Further, your equipment needs can change over time due to changes to your company, such as diversification. Leasing allows you to stay on the cutting edge of technology.
3. Leasing Has Tax Advantages.Rather than deal with depreciation schedules and Alternative Minimum Tax (AMT) problems, you, the lessee, simply make the lease payment and deduct it as a business expense.
4. Leasing Helps Conserve Your Operating Capital.Leasing keeps your lines of credit open. You don't tie up your cash in equity. Also, you avoid costly down payments. With other advantages such as off-balance sheet financing, leasing helps you better manage your balance sheet.
Although leasing does provide benefits to business owners, there are hidden costs to deal with, and business owners need to be aware of such costs.
Hidden Costs of Leasing
1. Non-Cancellable AgreementWhen entering into a lease contract, the business owner agrees to make all the lease payments to the end of the term. While there is no penalty for early payoff, the full payments are normally required to pay off the lease early.
2. Document FeesThese fees are administrative costs due upon signing the lease and range from $50 to as much as $350 or more, depending upon the complexity of the lease contract and size of the transaction.
3. UCC-1 FeesThese are fees required by the Secretary of the State where the equipment is being leased. The fee is usually is a one-time percentage that is due upon signing the lease documents.
4. TaxesIn most states, there is a tax on goods purchased. Some states tax at 5 or 6%, or more. The tax is factored into the lease payments, so be prepared to calculate this cost, as it could increase your monthly lease payments $20 or more per month depending upon the total cost of the equipment, and the state of purchase.
5. InsuranceA section in the lease documentation will require that the equipment be covered by insurance. Here the leasing company is protecting their interests. They want to make sure they will be fully compensated for the equipment in the event of fire, theft, flood, etc. Most business owners will already have adequate insurance on their building to cover such equipment (if it is contained and used inside). However other companies using more portable equipment (such as lift trucks, golf carts, hydraulic lifts, bulldozers, etc.) may need to take out additional insurance to assure adequate coverage.
The bottom line is that when you are deciding to lease equipment, be certain you are aware of all costs involved with the transaction. Then balance them against the benefits to choose the appropriate choice for you and your business.
While 80% of all US businesses have leased equipment at one time or another, some may not be aware of the benefits, nor of the hidden costs involved with leasing. Sometimes leasing equipment, instead of buying it, can be the best option for your business. However, there are many variables that should be considered, including costs, use restrictions, and legal implications.
Leasing operating equipment, such as computers, vehicles, and machinery, often makes more sense than buying. However, while favorable leases are often good bets, unfavorable ones can easily sink an emerging venture. While doing your legal homework can help prevent bad deals, it's always a good idea to have a lawyer look over a lease before signing it.
Benefits of Leasing Equipment
1. Leasing is Flexible.Companies have different needs, different cash flow patterns, and sometimes irregular streams of income. For instance, startup companies typically are characterized by little cash and limited debt lines. Mature companies might have other needs - to keep debt lines free, to comply with debt covenants, and to avoid committing to equipment that may quickly become obsolete. Therefore, your business conditions - cash flow, specific equipment needs, and tax situation may help define the terms of your lease. Moreover, a lease provides the use of equipment for specific periods of time at fixed rental payments. Therefore, leasing allows you to be more flexible in the management of your equipment.
2. Leasing can be Cost-Effective.Equipment is costly and some of the costs are unexpected. When you lease, your risk of getting caught with obsolete equipment is lower because you can upgrade or add equipment to best meet your needs. Further, your equipment needs can change over time due to changes to your company, such as diversification. Leasing allows you to stay on the cutting edge of technology.
3. Leasing Has Tax Advantages.Rather than deal with depreciation schedules and Alternative Minimum Tax (AMT) problems, you, the lessee, simply make the lease payment and deduct it as a business expense.
4. Leasing Helps Conserve Your Operating Capital.Leasing keeps your lines of credit open. You don't tie up your cash in equity. Also, you avoid costly down payments. With other advantages such as off-balance sheet financing, leasing helps you better manage your balance sheet.
Although leasing does provide benefits to business owners, there are hidden costs to deal with, and business owners need to be aware of such costs.
Hidden Costs of Leasing
1. Non-Cancellable AgreementWhen entering into a lease contract, the business owner agrees to make all the lease payments to the end of the term. While there is no penalty for early payoff, the full payments are normally required to pay off the lease early.
2. Document FeesThese fees are administrative costs due upon signing the lease and range from $50 to as much as $350 or more, depending upon the complexity of the lease contract and size of the transaction.
3. UCC-1 FeesThese are fees required by the Secretary of the State where the equipment is being leased. The fee is usually is a one-time percentage that is due upon signing the lease documents.
4. TaxesIn most states, there is a tax on goods purchased. Some states tax at 5 or 6%, or more. The tax is factored into the lease payments, so be prepared to calculate this cost, as it could increase your monthly lease payments $20 or more per month depending upon the total cost of the equipment, and the state of purchase.
5. InsuranceA section in the lease documentation will require that the equipment be covered by insurance. Here the leasing company is protecting their interests. They want to make sure they will be fully compensated for the equipment in the event of fire, theft, flood, etc. Most business owners will already have adequate insurance on their building to cover such equipment (if it is contained and used inside). However other companies using more portable equipment (such as lift trucks, golf carts, hydraulic lifts, bulldozers, etc.) may need to take out additional insurance to assure adequate coverage.
The bottom line is that when you are deciding to lease equipment, be certain you are aware of all costs involved with the transaction. Then balance them against the benefits to choose the appropriate choice for you and your business.
Equipment Leasing - 5 Reasons Why Business Owners Prefer Equipment Leasing
Within the past decade, equipment leasing has mushroomed into a multi-billion dollar industry and currently accounts for over one-quarter of all capital expenditures in the United States. There are five major reasons, or category of reasons why lessees prefer equipment leasing versus a loan for equipment acquisitions.1) Economic or Financial2) Financial Reporting3) Income Taxes4) Technological5) FlexibilityLet's examine each of these more closely.1) Economical. The economic attributes of an equipment lease can be considerable. The monthly rentals in the lease can be quite low when compared to the loan payments levied by a bank, due primarily to the impact of the residual value in a lease.The tax benefits alone that are generated in the transaction will influence the lease payments as well. The lessor can lower the equipment lease payments when receiving value from tax benefits, although, the lessor may use tax benefits to increase its yield.Longer lease terms also help to lower the lessee's lease payments. The repayment of the equipment cost is spread out over more periods so less payment needs to be charged each period to recover the entire cost.Equipment leasing also requires little, if any, up-front cash outlays when compared to a bank loan. Many leases require just one payment up front versus the normal down payment requirement on an installment loan for a lessee with a good credit history. The combination of lower up-front and lower subsequent payments helps to preserve working capital.Additionally, equipment leasing provides the business owner with another source financing, thus allowing them to diversify their funding options.2) Financial Reporting. Entities are constantly striving to have their financial statement look as strong and healthy as possible to their shareholders and lenders. When a company purchases equipment and finances it with a loan, an asset, as well as the corresponding liability, appears on the balance sheet. If, however, the company chooses equipment leasing over a loan, and that lease is classified as an operating lease, then no asset or liability would appear on the company balance sheet. Hence, the term operating lease has become synonymous with off-balance-sheet financing.Off-Balance-Sheet financing is sought after for a variety of reasons: to keep debt off the balance sheet, to improve the financial ratios of a company, and to potentially enhance the company's ability to borrow in the future. It is also conceivable that in the early years of the lease, the operating lease will improve the company's reported earnings when compared to a capital lease or purchase.3) Income Taxes. The value of tax benefits to the lessor can influence the lease payment charged to the lessee. A built-in reciprocity exists in tax leasing, in that the lessor-owner in a tax lease receives the tax benefits given up by the lessee-user and, in return, may pass those benefits on to the lessee in the form of a lower lease payment. The lessee also receives a tax benefit since the lease payments are fully deductible.Another income tax factor to consider is the Alternative Minimum Tax or AMT, which is very complex. AMT is a penalty tax imposed by Congress. Equipment leasing, not purchasing, helps an organization avoid falling into this penalty situation, thereby saving taxes. 4) Technological. In today's rapidly changing environment, there is always the risk that high technology equipment will become obsolete. Indeed, the risk of technological obsolescence is one of the primary reasons for leasing. Equipment leasing can help lessees transfer the risk of owning equipment which is no longer technologically useful.The transfer of risk can be accomplished in several ways. The most obvious would be for a lessee to enter into a short-term agreement, thereby requiring the lessor to assume the technological risk through residual value. If the equipment is still useful at the end of the lease term, the lessee could then renew the lease. If the equipment becomes obsolete during the lease term, the lessor may replace it with newer technology through what is know as a takeout, or an equipment upgrade.In a takeout, the lessor, through its access to the secondary market, will find a new home for the original equipment because equipment that is obsolete to one entity is not necessarily obsolete to another. For new and untried technology, many lessees prefer leasing the equipment on a short-term or experimental-use basis.5) Flexibility. A company may simply need the use, not the ownership, of a piece of equipment. Leasing can help a company avoid many of the headaches associated with equipment ownership. For instance, leasing can transfer the burden of disposing of the equipment o the lessor, who typically has better access to the used equipment market. The lessee can also contract with the lessor to take care of the other aspects of ownership, such as insurance, maintenance and property tax, by bundling these costs into the lease payment. Many lessees appreciate this one-stop shopping aspect of equipment leasing.Many owners/managers prefer equipment leasing, as opposed to purchasing, because leasing enables them to acquire needed equipment out of their operating budgets, without the necessity of going through a lengthy bureaucratic capital budgeting and approval process. Lessees may also benefit from very flexible structuring practices such as step or skipped-payment leases. These type of payment schedules are useful to businesses in industries that are seasonal and disruptive to cashflow.
Basics of Leasing Medical Equipment
Leasing equipment is a quick and affordable solution for business owners who are looking to expand their business without major cash outlay. Nationwide, approximately 40 percent of equipment is leased and about 80 percent of businesses lease some of their equipment. Medical professionals often prefer leasing equipment, as the equipment can be expensive to buy, has a long life, and won’t return a profit for years.
Flexibility is one of the key benefits of leases. A lease can be crafted for almost any situation. For example, if your company is seasonal, some leasing companies will be able to structure the terms of the lease to suit your financial pattern. Because of the built-in adaptability of leasing, there are almost as many kinds of leases as there are customers. But the process itself is simple, and the following five steps will apply to most equipment leasing transactions.
1. Determine what equipment you would like to leaseBefore you look for a leasing company or start a lease application, you should know what equipment you would like to lease. You can pretty much lease any type of equipment that is essential to your business. Leasing is for businesses, not individuals, so it is important that the purpose of the equipment is for business use only and not for personal use. Because medical equipment stays in the office and is used for medical work, this is usually not an issue.
2. Find a leasing company you want to work withA good place to begin would be the manufacturers of the equipment you wish to lease. Many equipment sellers have existing relationships with leasing companies. You are not bound to these relationships. Most leasing companies can lease equipment from any equipment seller that can be proved to be a legitimate equipment seller. Be prepared with a list of the different types of equipment you want to lease, and how many units of each type. Don’t hesitate to explain your intended use for the equipment, and how you expect leasing the equipment to help your practice be more profitable. This will give your equipment seller a clear picture of why you need a lease which is helpful.
3. Determine how long you want to lease the equipment, and if you want to purchase it at the end of the lease.
Many leasing companies will offer specialized terms to fit your business needs but the industry standard is a 2-year, 3-year or 4-year lease, and the longer the term, the smaller the monthly payment. The term will be dictated by not only your budget but the type of equipment. For example, equipment that will be out of date in three years would not have a 4-year option. The idea is to begin thinking about equipment like you think about employees. Pay them when they are working to make your company money. If you have questions about which option to select you can ask your leasing company for a recommendation.
Be sure to consider specifically how you want to end your lease. There are three standard end-of-lease purchase options, where you can buy the equipment for:
Ø The Fair Market Value of the equipment
Ø 10% of the price of the equipment
Ø One dollar
Keep in mind that the end-of-lease option you choose will have bearing on your monthly payment. For example, if you pay only a dollar for the equipment at the end of the lease you are going to have a higher monthly payment then if you pay %10 of the equipment cost at the end of the lease. This is because the leasing company will have to make all of its profit darning the course of the lease. Each leasing company will have its own stipulations, clauses and quirks so be sure to be clear on the details of your end of lease purchase options.
4. ApplyLease applications in general require information about your business and the owners of the company. Be prepared to provide:
o How long you’ve been in business
o Business bank account # and contact information (Provide banks that hold the highest balances and for the longest time. Leasing companies will want to be assured you will be able to comfortably make your monthly payments.)
o Social Security number and home address of all owners with over 15% ownership in the practice
o Three trade references from companies that you purchase from regularly whose bills you pay on time
o Point of contact for your business
Most applications are done online or by fax, and should take 5 minutes or less to complete. You will be asked to authorize the leasing company to review the credit of the owners of the company. If the transaction is valued at more than $100,000, financial statements and tax returns from the owners may be required, and approvals may take longer than the typical 48 hours.
Finalize your application and begin leasingThere are three types of replies you will get from a leasing company after you have submitted a lease application:
Ø Approved: Your next step will be to select the term and end-of-lease option. In many cases, doctors are considered low risk credit-wise, so approvals are more common.
Ø Declined: Next steps will be to try another leasing company or consider a different financing method. Keep in mind that each application will probably involve a credit check, which shows up on the owners’ credit reports.
Ø More Information Required: If a leasing company asks for more information, they are more than likely interested in you as a customer, but just need more information to be comfortable loaning you money.
Once you have been approved, and have selected the term and end-of-lease option for your lease, you will receive the lease documents for your review and signature. Making sure you understand all the established terms of your contract, keep in mind that all contracts are negotiable. Don’t hesitate to ask your sales rep if you have any areas that seem unclear or where you have concerns. It sounds obvious but don’t sign a contract you are uncomfortable with.
Be prepared to submit first and last month’s payment along with the signed documents. Once your payment has been received and processed, the leasing company will purchase your equipment and commence the lease. Once your equipment is installed, the leasing company will ensure that everything is working to your satisfaction usually by calling you to do what is call a “verbal” where they check that all the equipment they purchased on your behalf has arrived and works as expected. After that you have to pay your lease on a monthly basis and mark your calendar for the end of term so you make sure your leasing company doesn’t just keep charging you. That is it. It is quite simple actually and most businesses that lease once recognize how good it is for scaling their business and lease more equipment.
Flexibility is one of the key benefits of leases. A lease can be crafted for almost any situation. For example, if your company is seasonal, some leasing companies will be able to structure the terms of the lease to suit your financial pattern. Because of the built-in adaptability of leasing, there are almost as many kinds of leases as there are customers. But the process itself is simple, and the following five steps will apply to most equipment leasing transactions.
1. Determine what equipment you would like to leaseBefore you look for a leasing company or start a lease application, you should know what equipment you would like to lease. You can pretty much lease any type of equipment that is essential to your business. Leasing is for businesses, not individuals, so it is important that the purpose of the equipment is for business use only and not for personal use. Because medical equipment stays in the office and is used for medical work, this is usually not an issue.
2. Find a leasing company you want to work withA good place to begin would be the manufacturers of the equipment you wish to lease. Many equipment sellers have existing relationships with leasing companies. You are not bound to these relationships. Most leasing companies can lease equipment from any equipment seller that can be proved to be a legitimate equipment seller. Be prepared with a list of the different types of equipment you want to lease, and how many units of each type. Don’t hesitate to explain your intended use for the equipment, and how you expect leasing the equipment to help your practice be more profitable. This will give your equipment seller a clear picture of why you need a lease which is helpful.
3. Determine how long you want to lease the equipment, and if you want to purchase it at the end of the lease.
Many leasing companies will offer specialized terms to fit your business needs but the industry standard is a 2-year, 3-year or 4-year lease, and the longer the term, the smaller the monthly payment. The term will be dictated by not only your budget but the type of equipment. For example, equipment that will be out of date in three years would not have a 4-year option. The idea is to begin thinking about equipment like you think about employees. Pay them when they are working to make your company money. If you have questions about which option to select you can ask your leasing company for a recommendation.
Be sure to consider specifically how you want to end your lease. There are three standard end-of-lease purchase options, where you can buy the equipment for:
Ø The Fair Market Value of the equipment
Ø 10% of the price of the equipment
Ø One dollar
Keep in mind that the end-of-lease option you choose will have bearing on your monthly payment. For example, if you pay only a dollar for the equipment at the end of the lease you are going to have a higher monthly payment then if you pay %10 of the equipment cost at the end of the lease. This is because the leasing company will have to make all of its profit darning the course of the lease. Each leasing company will have its own stipulations, clauses and quirks so be sure to be clear on the details of your end of lease purchase options.
4. ApplyLease applications in general require information about your business and the owners of the company. Be prepared to provide:
o How long you’ve been in business
o Business bank account # and contact information (Provide banks that hold the highest balances and for the longest time. Leasing companies will want to be assured you will be able to comfortably make your monthly payments.)
o Social Security number and home address of all owners with over 15% ownership in the practice
o Three trade references from companies that you purchase from regularly whose bills you pay on time
o Point of contact for your business
Most applications are done online or by fax, and should take 5 minutes or less to complete. You will be asked to authorize the leasing company to review the credit of the owners of the company. If the transaction is valued at more than $100,000, financial statements and tax returns from the owners may be required, and approvals may take longer than the typical 48 hours.
Finalize your application and begin leasingThere are three types of replies you will get from a leasing company after you have submitted a lease application:
Ø Approved: Your next step will be to select the term and end-of-lease option. In many cases, doctors are considered low risk credit-wise, so approvals are more common.
Ø Declined: Next steps will be to try another leasing company or consider a different financing method. Keep in mind that each application will probably involve a credit check, which shows up on the owners’ credit reports.
Ø More Information Required: If a leasing company asks for more information, they are more than likely interested in you as a customer, but just need more information to be comfortable loaning you money.
Once you have been approved, and have selected the term and end-of-lease option for your lease, you will receive the lease documents for your review and signature. Making sure you understand all the established terms of your contract, keep in mind that all contracts are negotiable. Don’t hesitate to ask your sales rep if you have any areas that seem unclear or where you have concerns. It sounds obvious but don’t sign a contract you are uncomfortable with.
Be prepared to submit first and last month’s payment along with the signed documents. Once your payment has been received and processed, the leasing company will purchase your equipment and commence the lease. Once your equipment is installed, the leasing company will ensure that everything is working to your satisfaction usually by calling you to do what is call a “verbal” where they check that all the equipment they purchased on your behalf has arrived and works as expected. After that you have to pay your lease on a monthly basis and mark your calendar for the end of term so you make sure your leasing company doesn’t just keep charging you. That is it. It is quite simple actually and most businesses that lease once recognize how good it is for scaling their business and lease more equipment.
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