Advantages to Leasing Office and Technical Equipment | Starting a Business > Saving on Expenses

Wednesday, August 17, 2005

Advantages to Leasing Office and Technical Equipment

When you´re starting or growing a business, cash is often in short supply. One way to spend less is to lease essential office equipment instead of buying it. Unlike renting, which is much too expensive to consider as a long-term alternative, leasing computers, fax machines or furniture offers a number of critical advantages:

1. Leasing improves your cash flow. The main advantage of leasing is that it frees up cash. Equipment leases rarely require down payments, though you may have to set aside some cash for a refundable security deposit. By contrast, loans to finance the purchase of equipment typically require down payments of up to 25 percent or more.
2. Leases are easier to finance than purchases. Before extending a capital equipment loan, banks will usually want to see two to three years of financial records -- which most new companies do not have. Leasing companies, on the other hand, usually require only six months to a year of credit history before approving a furniture or office equipment lease.
3. Leasing makes it easier to keep pace with technology. Leasing is especially attractive if your business relies upon cutting-edge technology such as the latest computers, communications devices or other equipment. A series of short-term leases will cost you less than buying new equipment every year or two. Some office equipment leases even have yearly computer upgrades built into them -- eliminating that difficult decision of whether you can afford to upgrade or not.
4. Leasing allows you to afford more. While you might not be able to afford to purchase those pricey ergonomic chairs your employees are asking for, you may be able to lease them. Better furniture and equipment can create a more professional image and boost morale and productivity.
5. Leasing has balance sheet benefits. You may be able to exclude some leased assets and related obligations from your balance sheet. Such moves might improve financial indicators such as your firm´s debt-to-equity ratio or earnings-to-fixed-assets ratio. Bear in mind, however, that accounting rules do require your balance sheet to report assets leased under certain types of agreements.

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If you do decide to lease equipment, keep the term short -- two years is ideal. Try to negotiate a "modern equipment substitution clause" that lets you update or exchange your equipment so you don´t end up paying for obsolete technology. And insist upon a cancellation clause that lets you pay a fee to cancel the lease. Note the cost of any cancellation penalty.

Finally, if you think you might want to purchase the equipment after the term of the lease has ended, look for a lessor that offers an option to buy.

Article Source:
http://www.allbusiness.com/articles/StartingBusiness/1013-25-1840.html

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Equipment Leasing: Should You?

Monday, August 15, 2005

Like any other product that is out there, you should consider the benefits of owning versus equipment leasing. The difference is that in leasing you do not out right own the equipment but use it and pay for it on a daily, weekly, monthly or yearly basis. The fact that you do not own the equipment means that you do not have to fork over a large sum of money to make the purchase. Yet, is this the right choice for you and your business? It is important to weigh the pros and cons of equipment leasing in your individual situation to determine this.

To help you, here are some things that you should consider.

• What is the overall cost of the equipment if you purchased it? If you lease it, how long will it take you to pay this sum? If equipment will cost you a good deal more in the long run, you may not want to work with this. Yet, there are many instances where it can save you money as well.

• Determine your equipment need. What is the value of the investment and is this something that your company can even afford at this point?

• Who will maintain the equipment in the long run? If this is the owner’s responsibility, it may be wise to lease from them because they will cover those costs.

• Is there an option to lease the equipment for a certain period of time and then to purchase it at a lower price later? Because the equipment will be worth far less in just a few years, you may be able to get a better, more affordable price at that point.

Equipment leasing has many advantages especially for those who only need it for a short period of time. Yet, making the right decision of your company should be done carefully."

For more information please see http://www.equipment-leasing-deals.co.uk

Article Source: http://EzineArticles.com/

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Should You Lease or Buy Your Tech Equipment?

Saturday, August 13, 2005

Find out which option is right for your business with this in-depth look into the pros and cons of each.
By Peter Alexander

The next time your business needs new computers, networking equipment or other technology, should you buy it or lease it? If you don't know, read on. This month we'll take a look at the benefits--and downsides--of both leasing and buying technology equipment, plus the questions you should ask to ensure you get the best deal.
Leasing: The Benefits

* Leasing keeps your equipment up-to-date. Computers and other tech equipment eventually become obsolete. With a lease, you pass the financial burden of obsolescence to the equipment leasing company. For example, let's say you have a two-year lease on a copy machine. After that lease expires, you're free to lease whatever equipment is newer, faster and cheaper. (This is also a reason some people prefer to lease their cars.) In fact, 65 percent of respondents to a 2005 Equipment Leasing Association survey said the ability to have the latest equipment was leasing's number-one perceived benefit.
* You'll have predictable monthly expenses. With a lease, you have a pre-determined monthly line item, which can help you budget more effectively. Thirty-five percent of respondents to the Equipment Leasing Association's survey said this was leasing's second-highest benefit.
* You pay nothing up front. Many small businesses struggle with cash flow and must keep their coffers as full as possible. Because leases rarely require a down payment, you can acquire new equipment without tapping much-needed funds.
* You're able to more easily keep up with your competitors. Leasing can enable your small business to acquire sophisticated technology, such as a voice over internet protocol (VoIP) phone system, that might be otherwise unaffordable. The result: You're better able to keep up with your larger competitors without draining your financial resources.

Leasing: The Downsides

* You'll pay more in the long run. Ultimately, leasing is almost always more expensive than purchasing. For example, a $4,000 computer would cost a total of $5,760 if leased for three years at $160 per month but only $4,000 (plus sales tax) if purchased outright.
* You're obligated to keep paying even if you stop using the equipment. Depending on the lease terms, you may have to make payments for the entire lease period, even if you no longer need the equipment, which can happen if your business changes.

Buying: The Benefits

* It's easier than leasing. Buying equipment is easy--you decide what you need, then go out and buy it. Taking out a lease, however, involves at least some paperwork, as leasing companies often ask for detailed, updated financial information. They may also ask how and where the leased equipment will be used. Also, lease terms can be complicated to negotiate. And if you don't negotiate properly, you could end up paying more than you should or receiving unfavorable terms.
* You call the shots regarding maintenance. Equipment leases often require you to maintain equipment according to the leasing company's specifications, and that can get expensive. When you buy the equipment outright, you determine the maintenance schedule yourself.
* Your equipment is deductible. Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year. With most leases favored by small businesses--called operating leases--you can only deduct the monthly payment.

Buying: The Downsides

* The initial outlay for needed equipment may be too much. Your business may have to tie up lines of credit or cough up a hefty sum to acquire the equipment it needs. Those lines of credit and funds could be used elsewhere for marketing, advertising or other functions that can help grow your business.
* Eventually, you're stuck with outdated equipment. As I mentioned earlier, computer technology becomes outdated quickly. A growing small business may need to refresh its technology in some areas every 18 months. That means you're eventually stuck with outdated equipment that you must donate, sell or recycle.

Asking the Right Questions
If you're thinking about leasing equipment, you'll need to do your homework to ensure you get the most favorable terms. Here are a few questions that'll help you get started:

* What type of lease are you being asked to sign--a capital lease or an operating lease? A capital lease is similar to a loan. With this type of lease, the equipment is considered an asset on your balance sheet, and you get the benefits--such as tax depreciation--and risks--including obsolescence--of ownership. Capital leases are often for as long as five years.
* With an operating lease, the leasing company retains ownership, and for tax purposes, the equipment is considered a monthly operating expense rather than a depreciable asset. Operating leases are generally more popular among small businesses because they don't tie up funds and are usually short-term--three years or less.
* Is there a buyout option? You may have a choice between a fair-market value (FMV) option and a $1 buyout option. FMV means you can buy the equipment at the lease's end for its fair-market value, which could be hundreds of dollars. In contrast, a $1 buyout option means the equipment is yours for $1 when the lease expires. And while that sounds like the best option, keep in mind that monthly payments on FMV leases are usually lower than $1 buyout leases. If you're fairly certain you'll want to upgrade to new technology when your lease expires, go with the FMV option.
* How long is the lease for? Usually, leases for computer equipment run 24, 36 or 48 months. The longer your lease, the lower your monthly payments--but you're also likely to pay more over time with a longer lease.
* Does the equipment have to be insured? Some leasing companies require you to insure the leased equipment. If you don't, fees may be added to your monthly payment to cover insurance.
* Can I add to the lease? Most leasing companies don't mind if you add equipment to an existing lease. Your lease payment will be recalculated accordingly; lease terms don't usually change.
* Can I terminate the lease early? What if you no longer need the equipment you're leasing or you want to upgrade to newer technology sooner than you expected? Find out in advance if you can pay off your lease early, and if there's a prepayment penalty (and if so, how much?).

Ultimately, a few simple rules of thumb may help you decide to lease or buy. If your equipment requirements are relatively small and you have the money--or can get a low-interest loan--then just buy it. You'll save money in the long run. However, if you require a substantial amount of equipment, such as computers for your new company's 10 employees, leasing may be a better option. After all, why tie up a large amount of cash--especially when you could use that money to establish or grow your business?

Article Source:
http://www.entrepreneur.com/article/0,4621,323760,00.html

Peter Alexander is Entrepreneur.com's "Tech Trends" columnist and vice president of worldwide commercial marketing at Cisco Systems Inc., the leading supplier of networking equipment and network management for the internet.

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Non Status Car Leasing for the UK Marketplace

Sunday, August 07, 2005

Shopping for a new car should be an exciting and rewarding experience, but it can be all gloom and doom if you have non status credit. What could be worse than finding the exact car of your dreams, in just the right colour, with all of the right options, and then getting turned down by the dealer, bank, or finance company because of your credit history or some other circumstance that makes you non status?

Well, if you were the only person that this has ever happened to, then it would be fair to say that you are well and truly hosed. But, the fact is, there are millions of people in the U.K. who have less than perfect credit, or find themselves classified as non status because of a recent divorce, being self employed, or just simply not having any credit history to rely on. And yes, these people still can get into a new car. Want to know how they do it? Here's the secret.

Non Status Car Leasing Options

There are U.K. car financing companies who specialize in helping people who are classified as non status. These automobile loan companies realize that credit problems happen to good people, and the chances are that you will make your payments on time if someone would just give you a chance to prove it.

Here's how it works for Non Status Car Leasing

Typically you go about your business shopping for a car just like you normally would. Once you determine the make and model you want, and what options you want to order, you contact your non status car leasing loan provider and give them all of the details.

You'll have to fill out a credit application, but don't panic! They already know that you have non status credit or you wouldn't be coming to them. The application process is a legal requirement for any legitimate car loan provider. Once the application is completed, and the lender approves you for the amount you need, their expert car financing staff goes to work for you.

The way that it works is the non status car loan company will usually buy the car themselves and then lease it to you for a pre-determined period of time. You simply make the monthly payments just as if you leased it through a more traditional lender. As you make each payment you are building your good credit which will go a long way towards helping you when you are ready to get your next car. All you need to do is keep up with your payments. Should you ever find yourself in a position where you just can't make a payment when it is due, contact your non status lender right away. Being honest and up front will keep the relationship running smoothly, and the chances are they will be able to help you over the occasional rough spot. One last word: Be absolutely sure that you deal with a legitimate, licensed lender who specializes in providing non status car leasing alternatives. The last thing that you want to do is end up signing a car leasing deal with a company that's running a scam!"

Article Source: http://EzineArticles.com/

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Equipment Lease Financing | Loans > Business Loan Options

Thursday, August 04, 2005

"Cash-starved businesses may want to consider leasing, rather than buying, equipment. Leasing gives you access to many types of equipment: computers, copy machines, fax machines, trucks and more. And while leasing doesn't bring cash in the door, it does reduce the amount of cash you'll need to raise for your business.

When you lease equipment, a manufacturer, dealer or lender either buys or already owns the equipment you want. In exchange, you make monthly payments to the owner (lessor). The monthly payment structure typically allows you to treat the payments as tax-deductible business expenses.

Leasing also makes it easier to keep pace with technology... This is especially important if your business relies upon cutting-edge technology such as the latest computers, communications devices or other equipment. A series of short-term leases will cost you less than buying new equipment every year or two. Some leases even have yearly computer upgrades built into them -- eliminating the difficult decision of whether you can afford to upgrade or not.

If you need equipment right away, leases are approved much more quickly than loans and typically involve less paperwork and more relaxed credit requirements. Many equipment vendors provide lease financing, as do a number of banks. For early stage businesses, equipment lease financing is more easily obtained from a vendor than a bank.

Ultimately, leasing equipment will likely prove more costly than buying, but if cash flow is an important issue, then leasing is an attractive alternative.

When leasing, be sure to consider the following points:"

* Lease term. What is the lease term? The length of the lease will affect the amount of your monthly payment, with a longer lease term usually meaning a lower monthly rent.
* Upfront payment. What is the size of any upfront payment? Can you reduce the upfront payment and amortize it over the life of the lease?
* Monthly payments. Are the monthly payments reasonable? You can analyze the amount of the payment by determining the interest factor associated with the lease.
* Return rights. For vendor-leased equipment, under what circumstances can you return the equipment if there are problems?
* Early termination. Do you have the right to terminate the lease early? Most lessors will be reluctant to do this, but you may be able to negotiate an early termination right in exchange for payment of a fee.
* Option to purchase. Try to negotiate a right to buy the equipment. Equipment lessors will often give you this right at the end of the lease term, usually for a fixed price (e.g., 10 percent of the purchase price of the equipment) or at fair market value.

If you decide to lease equipment, keep the term short -- two years is ideal. Try to negotiate a "modern equipment substitution clause" that lets you update or exchange your equipment so you don't end up paying for obsolete technology. And insist on a cancellation clause that lets you pay a fee to cancel the lease. Be sure to note the cost of any cancellation penalty.

Article Reference
http://www.allbusiness.com/articles/Loans/982-3891-3893.html

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Office World News: Making the case for equipment leasing

Tuesday, August 02, 2005

We've all heard that old adage, it takes money to make money. We all need equipment to do our jobs and deliver our products or services - and that equipment costs money... or does it.

As businesses continue to compete in the new economy, many are searching for proven new ways to address their equipment financing challenges. The choice for many businesses is clear: equipment leasing. Equipment leasing affords companies the ability to leverage their capital, control cash flow and acquire needed equipment.

According to Equipment Leasing Association (ELA) research, eight out of 10 U.S. companies lease their equipment. Leasing as a strategic financing option continues to grow. Between 1998 and 1999, overall U.S. leasing volume grew more than 15 percent, from $207 billion to $226 billion - the forecast for 2000 promises to bring greater growth.

But why do companies lease equipment? There are a variety of reasons: leasing offers a valuable financing package that allows companies to maximize their purchasing power; factoring all benefits in, leasing is often the least expensive financing method; and leasing equipment transfers the risk of technological obsolesence from the lessee to the lessor.

Every company must consider different options for procuring equipment based on its business model and business environment. Following are two real world case studies which illustrate how companies have used equipment leasing as a strategic means to fulfill a business need."

LEASING ALLOWS EXPANSION

Schmitt Marble, Inc. of Cincinnati, Ohio, is a privately held, marble production company that produces cultured marble countertops, tiles and other marble products. Schmitt Marble has been in business for 30 years, has revenue just shy of $5 million and has 85 employees. In 2000, Schmitt Marble began an expansion and opened a new operation in Columbus, Ohio.

Schmitt Marble was looking for strategic financing methods to fund its expansion. Through business forecasting, Schmitt Marble recognized that the expansion would increase its business by 50 percent. Prior to April 2000, Schmitt Marble did not lease any of its equipment. All company assets were owned. All new equipment procured through the expansion process was leased by Schmitt Marble.

Schmitt Marble realized it had an opportunity to grow its business by 50 percent with the addition of a new production plant. Schmitt Marble had a need for a complete line of marble production equipment such as molds, autocasting equipment and spray booths. Schmitt Marble wanted to lease 40 percent of its overall equipment. Interested in preserving capital and controlling monthly costs, leasing its equipment afforded Schmitt Marble a "total package solution" for financing both the new facility and acquiring the required equipment.

Schmitt Marble considered a loan or a line of credit, but when the company weighed the opportunity costs of a straight out purchase against a lease, leasing offered a better solution. Leasing the equipment provided Schmitt Marble with a payment structure that would match the revenue stream of the new facility.

Key Equipment Finance Group, an equipment leasing company, structured Schmitt Marble's lease as a finance lease with step payments. This structure allowed the lease payments to match Schmitt Marble's cash flow. This greatly benefited the company because as its new operation was ramping up, cash flow could be managed and budgeted to meet the payments.

"As a small company, we live on cash. Leasing allows small businesses to creatively control their `cash out' and keep their costs low while building a company up and expanding to generate new revenue streams," said Paul Pendergast, president and chief executive officer of Schmitt Marble.

Equipment financing afforded Schmitt Marble the ability to leverage its capital, increase cash flow and maintain more funds for expansion expenditures. Key Equipment Finance Group provided one-to-one service and a total package solution that would enable Schmitt Marble to reach its double-digit growth goal. Key Equipment Finance Group customized a program to meet both Schmitt Marble's financial and equipment needs.

Equipment leasing offers a variety of benefits which enable companies to meet different business goals. Whereas Schmitt Marble used equipment leasing as a means to expand its business, East Texas Copy Systems used leasing because of the flexibility in terms that leasing offered.

LEASING AFFORDS FLEXIBILITY

East Texas Copy Systems (ETCS) of Tyler, Texas, is an authorized Canon Dealer of digital networked office equipment. With 15 employees, ETCS services large quantity accounts, such as hospitals, school districts, city and county governments and major industries.

One of ETCS' largest customers, a non-profit health system, wanted to take advantage of leasing equipment as a means to minimize cash outlay and acquire 400 copiers and facsimile machines, as well as to structure a deal that would satisfy the health systems' billing needs.

ETCS recognized that having the hospital lease copiers from Canon Financial Services would offer more flexible leasing terms, reduce its costs in procuring the equipment and enable the company to pay for the equipment as it is being used.

ETCS needed a flexible, all-cost included leasing program in order to meet its customer's requirements. When considering financing options, the health system also looked at acquiring the copiers using a bank line of credit; however, leasing the equipment from Canon Financial proved to be a more flexible and process-efficient solution.

The challenge of meeting the customer's billing needs was to integrate an aggregate cost-per-copy billing cycle with individual cost center reporting. Canon Financial structured the lease to meet the billing needs defined by the health system. Each copier was billed with individual reporting to its own cost center. Aggregate pricing was based on lease volume within a 60-day period; thereby, lowering the lease price as the hospital continued to order copiers.

Canon Financial Services' flexible invoicing accommodated the hospital's payment terms, thus avoiding administrative delinquency, which had been a problem with the hospital's previous financing source.

The flexible lease that ETCS developed with Canon Financial Services afforded the hospital the ability to lease six to 10 copiers per month; reducing monthly capital outlay while affording the hospital the equipment needed to supply its growing demand for copiers. This arrangement allowed ETCS to win the hospital's business and steadily increase its volume leased through Canon Financial Services based on equipment demand.

"Canon Financial Services structured the billing cycle to the individual cost centers, making it more convenient for the hospital's different invoicing needs," said Greg Walker, ETCS president. "Canon Financial Services really proved to be extremely customer service-oriented, just as we like to be at ETCS."

Leasing their copiers afforded the health system the ability to both leverage its capital in addition to, protecting itself from technical obsolescence.

LEASING IS GOOD BUSINESS

The benefits Schmitt Marble and East Texas Copy Services reaped by leasing their equipment are not the only benefits that leasing offers companies looking to grow their businesses. Leasing offers numerous advantages: Flexibility and customized solutions

In today's business environment, you need the flexibility to manage your business income efficiently and profitably. Companies have different needs, cash flow patterns, and, sometimes irregular streams of income. With leasing, you can design a program to address your cash flow and budget requirements. You get the equipment you need and the flexibility you want.

Increased purchasing power.

Lease financing allows you to acquire better equipment, often more top-of-the line, than you could with cash.

Clean balance sheet.

Leasing helps conserve your operating capital. Your working capital and bank credit lines remain available for inventory, expansion and emergencies. Leasing helps you better manage your balance sheet.

100 percent financing.

With leasing, you avoid costly down payments. The term of the lease can be matched with the useful life of the equipment.

Convenience.

To survive today, you often need to move fast. Leasing can allow you to respond quickly with minimal documentation and red tape.

Hedge against inflation.

A lease provides the use of equipment for specific periods of time at fixed payments. This fixed-rate pricing protects against inflation. You get today's equipment with tomorrow's dollars.

Tax advantages.

Some lease programs allow you to make the lease payment and deduct it as a business expense. An operating lease allows a company to potentially accelerate the expense or "write-off' of equipment. This can result in a significant tax advantage by decreasing net income.

Upgraded technology.

Leasing allows you to keep pace with technology. Your risk of getting caught with obsolete equipment is lower because you can upgrade or add equipment to meet your ever-changing needs.

THE BOTTOM LINE

Identifying flexible financing options is an ever-present challenge for most businesses. For many, leasing is part of the solution. Leasing offers many advantages over traditional financing options - from flexibility and convenience to a clean balance sheet and a technological edge. To learn more about leasing, visit EL-Ns LeaseAssistant Web site at www.LeaseAssistant.org/.

EDITOR'S NOTES: Michael J. Fleming is the president of the Equipment Leasing Association of America (ELA). ELA, a nonprofit organization headquartered in Arlington, VA., representing over 800 member companies, which provide a variety of asset-based financial products, primarily equipment leasing.

BY MICHAEL FLEMING, PRESIDENT EQUIPMENT LEASING ASSOCIATION

Copyright B U S Publishing Group, Inc. Sep 2000
Provided by ProQuest Information and Learning Company. All rights Reserved

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Equipment Leasing

Short on cash, but need new equipment to grow? Lease what you need.

What It Is: Equipment leasing is basically a loan in which the lender buys and owns equipment and then "rents" it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business may purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing, lease new equipment or return it.

Appropriate for: Any business at any stage of development. For start-up businesses with no revenues, "small ticket" leases, those of $150,000 or less, are feasible on the personal credit of the founders or owners—if they are willing to make the monthly payments.

Best Use: Financing equipment purchases. Leasing can also finance the soft costs often associated with equipment purchases, such as installation and training services.

Cost and Funds Typically Available: Lease financing is generally more expensive than bank finances, but in most instances it's more easily obtained. The range of funds available is unlimited.

Ease of Acquisition: Easy for leases of less than $150,000. An application for a small-ticket lease is generally no more complex than a credit card application. Leases for more than $150,000 require detailed financial information from the business, and the leasing company conducts the same credit analysis a conventional bank would.

First Steps
Finding an equipment-leasing company is easy. Almost any equipment a business could conceivably need offers a lease option. Thought it's not apparent at first glance, the company offering the lease financing is not the same one that is selling the equipment. The company selling the equipment simply makes a direct referral to a leasing company with which it does business.

It's a good idea to get a quote from the leasing firm referred by the company that wants to sell you the equipment. The quote should be competitive. After all, the co selling products wants to sell as many as possible, and it surely doesn't win any points by referring a leasing company that gouges its customers. But it also pays to get another quote. Usually, the company selling the equipment has more than one leasing company on hand. Or, ask a friend or a business associate.

As a final point, when looking for a leasing company you should understand whether you are talking to a broker—the person who simply structures deals, then gets them financed through any of the leasing companies he or she works with—or a leasing company that is actually putting its own funds on the line.

There's nothing wrong with brokers. The situation is analogous to working with an independent insurance agent. He or she might have intimate knowledge of the marketplace and know where to go to get the kind of insurance, or lease, you need. In theory, this generates savings in excess of his or her fees. But with brokers, the same advice applies: Buyer beware.

Full Article here
http://www.entrepreneur.com/article/0,4621,300783,00.html

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