For a new business, trying to get a bank loan can be a challenge especially without business credit history to back up your loan application.  If you need equipment financing is an issue, perhaps you may consider business equipment leasing?

Who Can Lease

Both new and established businesses are eligible to apply for equipment lease financing.  In fact, this financing technique has been employed by many small businesses and large corporations for a long time.

Why Lease Equipment

Rather than apply for a bank loan to buy the needed equipment, a new business owner can apply for a “lease” to avoid unnecessary delays with the business operations.   Instead of waiting for months to get their business loan approved, leasing equipment involves a quicker and uncomplicated procedure.

Add to this, equipment lease financing is generally cheaper since it does not require a down payment.  Many leasing companies offer flexible repayment terms (monthly, quarterly, bi-annual, annually) to complement the business’s needs.

Indeed, equipment lease financing is recommended for smaller businesses.  By leasing equipment, the business owner can use its working capital on other expenditures such as purchasing supplies, hiring workers, advertising your products and services, instead of spending the money on devices or special machines.

Preparing Paperwork

What kind of paperwork do you need to prepare?  The specific requirements may vary from one leasing firm to the next.  Still, most lessors generally require a written equipment lease proposal, the business’s recent financial statements, and tax returns.

Your lease proposal must clearly present the type of business you run, your reason for getting a lease, the specific machines or devices you need, and other important information about your company that will help convince your lessor to approve your application.

Check Your Credit

Some business equipment lease providers have strict standards and may call for good to excellent credit history.   Nonetheless, you can find lessors that offer leasing services even for customers with no credit history or with bad credit history.

In fact, even business owners who have a record of bankruptcy can get approved as long as the bankruptcy has been discharged.  If you have bad credit, it is a good idea to include a letter explaining the details about your bankruptcy or poor credit.

Tips For Sure Approval

For new business owners, do not test the waters by submitting multiple lease applications to different companies.  If a potential lessor sees too many inquiries in your report, it may raise doubt as to why other lessors are not willing to grant you a lease.

Keep in mind that not all leasing companies offer lease for new businesses.  Some lessors may require applicants to be at least 2 years in operations.  However, there are lease companies that do offer special lease arrangements for new businesses.

Find a leasing company that provides service to businesses in the market you belong.  For example, some lessors specialize in transportation while others may specialize in medical equipment, printing equipment, baking equipment, etc.  Check the prerequisites of a particular equipment lease provider so you can avoid unnecessary rejection.

If you are planning to get into a restaurant business, one of the biggest challenges you will face is equipment financing. Setting up your own restaurant demands a considerable amount of cash. For one, you need to invest on restaurant equipment such as stoves, grills, gas range, freezers, tables, seats, cash register, credit card machines, computer, etc. Think about how much start-up capital you will need to be able to buy all the necessary equipment and furnishing.

True, you can apply for a business loan, but if you spend all money on equipment alone, there may not be much left for other expenses such as marketing, supplies, and hiring workers. Is there an alternative financing option for aspiring restaurateurs? Rather than purchasing all the equipment and furnishing your business needs, why not consider business equipment lease financing?

Here are equipment lease tips that are especially for restaurant business owners:

Make Sure It’s NSF Approved. If you are going to lease kitchen gadgets like blenders, mixers, refrigerators, coolers, etc. you need to make sure that the devices all has the NSF (National Sanitation Foundation) Sticker. Commercial kitchen appliances that do not have an NSF Sticker may cost you levies and fines once your local health department conducts sanitary inspection.

Avoid Overbuying. With all the excitement of starting a business and having a restaurant place, some entrepreneurs may be overspending by taking on too many gadgets or equipment. Before ordering equipment to be leased, you should be realistic about your needs and consider your budget and the space.

Follow Local Regulations. You should know that there are specific regulations in furnishing a commercial kitchen. Before submitting your equipment lease application, make inquiries from your local health department, fire inspector, building inspector, and city zoning about the specific rules in furnishing a restaurant business.

Shop around. Compare and contrast proposals from various business equipment lease companies. Take a closer look at the prices along with the Terms and Conditions of the lessor.  Besides the equipment, will installation and maintenance services be provided as well? Can you expect a reliable customer service?

Analyze your lease contract. Never sign up for an equipment lease without examining all the stipulations in your contract. If you are not careful, you could get stuck with a bad lease and may not have much choice but to wait until your lease term ends.

Check your rating. Some commercial restaurant equipment leasing providers only grant approval to clients with good to excellent credit history. If you have bad credit, your application may get declined or you may be given high rates. Thus, it is advisable to check your credit report first before submitting your lease application. If you have good credit rating, you will be in much better position to negotiate for a lower interest rate or a more flexible repayment term.

Get free lease product distributors. Some product distributors do offer a free lease If you make them your official supplier. For instance, if you offer coffee and beverage in your restaurant, find a distributor that will provide you with a coffee maker or a freezer at no extra cost.

Did you know that you can negotiate the value of the vehicle, capitalized cost reduction, length of the lease, mileage allowance, and options and equipment when you’re leasing a car? Here’s all you need to know to get a great deal.

• The agreed-upon value of the vehicle — just as you can negotiate the price of a vehicle when you buy it, you can negotiate the value of a vehicle when you lease it. The agreed-upon value of the vehicle is the primary component of the gross capitalized cost, so the lower this value is, the lower your monthly payments will be.

Manufacturers, dealerships, or lessors sometimes offer special incentives that reduce the agreed-upon value of the vehicle. If this is the case, you may not have much room to negotiate.

In any price negotiation, it helps to know the lessor’s cost for the vehicle. You can get dealership cost information from a variety of sources on the Internet and from publications that are available in most public libraries. Use this information to help you negotiate the agreed-upon value of the vehicle.

• The capitalized cost reduction (cap cost reduction) — the capitalized cost reduction for a lease is like a down payment when buying a car. The more you pay to reduce the capitalized cost, the lower your monthly payments will be. The trade-off is that you have to pay the cap cost reduction up front, and you may not have the lump sum amount or you may want to do other things with that money.

Ask how different cap cost reductions will affect your monthly payment (for example, if you pay $1,000 instead of $3,500, what would your payments be?).
Most lessors restrict the maximum cap cost reduction you may make. For example, the maximum may be 20% of the MSRP or 20% of the value of the vehicle.

As an alternative to paying a higher cap cost reduction, you might be able to reduce your rent charge, and thereby lower your overall costs, by paying a higher security deposit

You may also want to consider a single-payment lease as an alternative to paying a higher cap cost reduction, if it will reduce your costs.
Some lease offers are based on a specific cap cost reduction. If you see a lease offer that is appealing to you, be sure to check the cap cost reduction and ask how the other lease terms and conditions would change if you paid more or less up front.

• The length of the lease — most leases are for 24, 36, 48 or 60 months (2-5 years). However, you may negotiate a lease for just about any period in between. Keep in mind, though, that not all lessors offer all terms — for example, some offer only 24- or 36-month leases. Occasionally you may find leases with terms shorter than 24 months or longer than 60 months.

Sometimes you may find a lease for a period other than a full year–for example, 39 months instead of 36 months. Such a lease may be a special offer. For example, the lessors may use the same residual value for the longer term as for the shorter term, thereby spreading the depreciation over more months and reducing the monthly payments.

When evaluating such a lease offer, be sure to compare all the other lease terms in addition to monthly payments. Unless the lessor is making a special offer, such as in the example, negotiating a different term for your lease will change the residual value in the monthly payment calculation.

The longer the term of your lease, the lower the residual value will be (because the vehicle will be older when you return it). Thus, you will pay more in total depreciation with a longer-term lease.

Try to match the length of the lease to your needs and preferences. Negotiating a longer lease will generally lead to a lower monthly payment, but deciding to end a longer lease early could be costly. In a closed-end lease, the opportunity to avoid unexpected depreciation and walk away occurs only when you have completed the full term of the lease and paid any amounts owed.

• The mileage allowance — common annual mileage allowances in leases are 10,000 miles, 12,000 miles, or 15,000 miles, but you can negotiate other limits. Many lessees drive more than 14,000 miles a year. Try to match the miles you will be driving to the mileage allowance in the lease.

If you think you’re going to be driving more miles than the lease allows, it’s generally better to negotiate a higher mileage allowance in the lease than to pay for the extra miles at the end of the lease. On the other hand, if you think you’ll be driving fewer miles, you may be able to save money by choosing a lower-mileage-allowance lease.

A lower-mileage lease will generally specify a higher residual value for the vehicle because a vehicle with fewer miles is worth more and is expected to have less wear. This higher residual value means that you will pay less for depreciation and your monthly payments will be lower. In contrast, a higher-mileage lease will generally specify a lower residual value for the vehicle because a vehicle with more miles on it when it’s turned in is worth less than a lower-mileage vehicle.

Therefore, you’ll pay more for depreciation during the term of the lease. And if you don’t use those miles, you may not be entitled to a refund at the end of the lease. If the lessor has a refund policy, it should be stated in the lease.

• Dealership- and consumer-installed options and equipment — just as when you buy a car, you can choose the features you want and add accessories to a leased vehicle. You may want to upgrade the sound system, install a leather interior, or add a sunroof to the vehicle.

It may be preferable to have those items included in the lease rather than added after you lease the vehicle because if the lessor considers the equipment, for resale purposes, as adding value, the equipment will increase the residual value of the vehicle.

You would then pay only for the expected amount of depreciation of the equipment during the lease, not for the full cost of the equipment. However, lessors often have different policies for determining what is value-adding equipment.

Adding an extra feature may increase your personal enjoyment of the vehicle, but it may not appreciably increase the vehicle’s resale value at lease-end. Ask the lessor about its policy on any equipment you want to add.

Also, in some cases, lessors will not let you add something if removing it may damage the vehicle or reduce its value. For example, you may not be able to add a trailer hitch, a luggage rack, or a mount for a car phone unless you are willing to leave it on the vehicle.

Be prepared to negotiate the price for any of these features and accessories. It helps to know the lessor’s costs for these accessories and features.

You can get dealership cost information from a variety of sources on the Internet and from publications that are available in most public libraries. Use this information to help you negotiate.

You may also be asked if you want to sign up for a service or maintenance contract or for rust-proofing, fabric protection, undercoating, and so forth. These services are optional, and their prices can be negotiated.

You’ll need excellent negotiating skills when you lease a car. By using the above tips, you’ll soon be leasing your vehicle at very favorable terms.

You are starting or expanding your business – great! But you are looking at many more demands on your finances: office equipment, tools, furniture, computers and peripherals, vehicles, etc. Deciding whether to buy or lease what you need might seem overwhelming.

Leasing is tempting to many, as it requires less cash up front. Having enough cash is essential for survival when beginning or expanding your business, as you will also need to invest in many intangibles such as marketing, licensing, or hiring help. But, leasing usually costs more in the long run, often quite a bit more, and you are normally committed to a contracted time period. There are advantages and disadvantages to both.

Let’s look at some of the pros and cons:

Some Advantages of Leasing:

1. Lower Costs at Start-Up
Few businesses have “more than enough” cash on hand, especially when just beginning or expanding. Lower start-up costs can give you more time to get settled into the marketplace and get the word out about your products and services, giving you a much better chance of surviving those risky first years. You can get a lot more for a lot less immediate expenditure by leasing. Buying 20 computers will cost you thousands of dollars; leasing 20 computers may only run you a few hundred dollars per month.

2. Support and Maintenance
Leased equipment usually includes ongoing support, maintenance, upgrading, and possibly even training for you and your staff. You can even “lease” your business management software and services by way of online subscription. This can enable even the smallest business to have the latest software versions automatically provided, and support staff on-call in the event of trouble. (You might be amazed to learn how much time is lost and headaches created in many small businesses by confusing and challenging management and record keeping software and systems.) With hardware, it is far easier, for example, to call the lessor and have a broken copier replaced immediately than to wait for the repair serviceman for your purchased copier, wait out the downtime, and then face the bill for his services.

3. Flexibility
When you buy something, even if your needs change or better technology becomes available, your investment is tied up in the purchased item. Leasing may allow you to update or replace your equipment or furniture when you need to, or even get rid of the commitment if you no longer need the item.

4. Tax Advantage
Most lease payments can be fully deducted in the year you paid them, whereas major equipment purchases may have to be depreciated over several years. Since your money will likely be tighter in the beginning months and years of your business, the ability to offset lease expenses against your initial investments may help you greatly at tax time.

Some Advantages of Buying Equipment and Supplies Outright:

1. Lower Lifetime Costs
Many things will cost you far less in total if you purchase them outright rather than leasing. You might pay $300 for an ergonomic desk chair that will serve you well for many years. The same chair, if leased, might run you $30 per month. You would then be paying $360 per year for the leased chair.

2. Lower Monthly Overhead
When you lease, you must pay the lessor on time, regardless of the level of cash on hand. If the income of your business varies widely from month to month, you can choose to only purchase equipment when you have the cash on hand and you will have fewer problems meeting your monthly budget.

3. Assets Rather than Liabilities
What you buy outright becomes an asset of your business, and so enhances your “bottom line.” Lease payments, on the other hand, qualify as liabilities, and so lower your company’s value. This may be important if you need to get a business loan or decide to sell your business. If you move or go out of business, your assets may be sold or taken with you, but it may be much harder to dispose of your lease contracts.

4. Tax Advantage
Since the IRS allows you to deduct a large amount of your business purchases from your gross income, if you are having a good year you may save significantly more by purchasing outright rather than leasing.

So, obviously there are pros and cons of buying as well as leasing. Here are some tips to help you make the best decision:

* Leases are best for more expensive items, and cash purchases for less expensive items. Lower cost items can usually be afforded from income on hand, but it may not be advisable to deplete your funds to make larger purchases. If you lease the larger items, you can budget to save and purchase your own later, and still have management and promotion funds available now.

* Check with your tax advisor. Find out the financial and tax implications of leasing versus buying for your individual situation.

* Last but certainly not least, don’t be tempted to buy what you don’t really need. If you are just getting started, use thrift-shop desks and other furniture, settle for a good telephone with answering machine rather than the full inter-office network being promoted, and watch for office or industrial close-out sales or auctions, where you can buy still-serviceable supplies for pennies on the dollar. If your company is to grow and thrive, cash in the bank is worth much more than beautiful furniture or the latest techno-marvel.

A survey conducted by The Equipment Leasing Association reveals that many businesses in the US lease equipment – from the smallest office device like the laptop to the largest machines and vehicles.  It has been reported that more than $200 billion worth of equipment are leased each year.

If you are a small business owner, here are some tips on how you can save more from your equipment lease:

1. Choose the Right Leasing Company.  Dealing with the wrong lease provider may cause unnecessary problems.  For example, you may encounter delays with the approval of your lease application or with the delivery of your leased equipment. Some leasing companies may charge hidden fees or may not provide the best customer service.

To avoid such complications, it is essential that you shop around for potential business equipment lease companies with good reputation, stable financial condition, and an impressive track record of service.

2. Choose the Right Lease. Business equipment leases come in different forms and packages.  You need to do careful evaluation to make sure that your lease contract matches with the needs of your business.

Before signing up for business equipment leasing, examine your contract and check the specific terms of your lessor particularly with regards to pricing, repayment terms, and the conditions on obsolescence, end-of-lease options, customer service, termination, etc.

3. Choose a Short Term Lease.  A shorter lease period will give you the chance to plan your next move and avoid getting stuck with a poor lease contract.  When you receive your end-of-lease notice period, you can choose whether to return the leased equipment or renew you contract.  The end-of-lease period may range from one month to six months so be sure that you are aware of the time frame.  Otherwise, you could be stuck with an automatic lease renewal.

4. Cut Back on Your Interim Rent.  The Interim Rent is a daily fee you incur from the time you receive the equipment to the official start of lease.  One way to cut back the costs is to arrange the delivery of the equipment by the end of the month, since most lease contracts officially start at the first day of the month.  You may also request your lessor to limit the Interim Rent for a definite number of days (10 to 15 days) regardless of the delivery date.

5. Check All Fees.  See to it that you clearly understand all the fees associated with your lease.  Examples of lease charges are commitment fees; non-use fees or facility fees, late rental penalties, early termination penalty, etc.  Spend time comparing proposals from different lessors.  If there are certain charges that are found in one proposal but are excluded in others, negotiate with the lessor if these charges can be reduced or completely waived.

6. Return or Buy Provision.  Make sure that you will have the option to return or purchase the leased equipment at the end of your lease term.  If you choose to return, will you incur additional fees?  If you choose to buy the equipment, will you be given a reasonable price?

7. Ask for a discount.  You can save a great deal from you lease costs if you ask for a discount.  This is especially true if you have an excellent credit rating to back you up.  Don’t be afraid to negotiate with your chosen lessor.  If you have been a customer for a long time, then surely you deserve the best deal.