Equipment Leasing and Financing

This article is going to discuss what is equipment leasing/financing, what are its benefits, leasing plans and how it relates to the start up and seasoned business.

Leasing is a form of renting but with a buyout clause at the end of the lease to take title to whatever we are leasing. The requirements to get into the lease may be as low as first and last payment and as much as 25%. Each situation is different and this offers the start up and seasoned business a way to invest very little monies into the business. Additionally, all other monies can be used for operating expenses such as marketing and other key areas. Leasing is not a new form of financing but could be a lending solution to the start up business. The small sample of type of industries that leasing can be used for are the following:

Dump,garbage, tow, flatbed, water trucks, over the road trucks and day cabs, heavy and construction equipment such as bulldozers, tractors, excavators, skid steer loaders, backhoes, flatbed, drop deck, refrigerated, dry van trailers, and industries which include limousines, limousine and shuttle buses, and
machinery and production equipment.

The benefits of leasing may result in off-balance sheet financing reporting, tax incentives and conserving cash flow and preserving lines of credit for working capital purposes. Many leasing requirements may only require the initial outlay of first and last rental payment. Most leases finance 100% of the cost of the equipment such as soft costs which include shipping, software, training and installation. Additionally, leasing lets you regularly upgrade your equipment, eliminating your utilization of old, outdated equipment and reducing repair options.

Some of the leasing plans available to the lessee are $1.00, 10% or 20% purchase options as well as Trac Leases and FMV lease buyouts. Additionally, some lenders offer seasonal payments, deferred payments for ninety days, declining payments and half payments for a specified time period. It is important that the lessee understands all these different lease plans available as well as the buyout clauses.

The lessee has many options to consider in negotiating his lease. He must understand each lender’s requirements and see if it fits within the realm of the lessee’s requirements. Some lenders will accept the start up business whereas others will not want to lend to this group. They consider that their risk capital can be invested in other types of portfolios that can be better served. Many lenders require full documentation which includes a couple of years of personal income tax returns, a personal financial statement, and other underwriters requirements. However, in the past couple of years, there is a select group of lenders out there require an application only program. These lenders have their own computer scoring model and eliminate the necessary additional paperwork of other lenders. These application only programs are usually restricted to the seasoned business, however there are a few out in the industry which will work with the start up business as well. The amounts of the application only program run as high as $250,000 for the seasoned business and $100,000 for the start up. Additionally, the lender will lease the qualified asset probably from 36-60 months and many won’t finance any equipment and commercial vehicles over ten years old.

It is important to understand the lease terms, the rate factor the lender is charging and the buyout clauses in the lease to take title. If you anticipate paying off the lease early, you should consult your lender to ascertain there is no prepayments for a early payoff. The last thing to understand that the lessee is going to guarantee the lease.

The last point to consider whether you are a start up and/of seasoned business due to economic conditions, there are some unusual specials available for off leases and repos. The lender has excess inventory on their books that they need to liquidated or re-leased as quick as possible. The minimum credit score for the applicant can be as low as 575 and prior bankruptcies may not be an issue in the credit decision.

Either way, spend your proper time investigating the item you are looking for to acquire, get the best price that you can obtain and secure proper financing.

Happy hunting…

J.M Luna has over thirty years in the financial field. It includes accounting and taxes, leasing, hard asset money and working capital loans, and commercial lending. U.S Corporate Capital Leasing Group can assist the start up as well as the seasoned business in all types of industries.

More Help For Avoiding Fake Commercial Financing Articles

In a recent working capital financing article, we described the increasing use of fake content about commercial loans throughout the internet community. In the earlier AEX Commercial Financing report, we provided practical suggestions for avoiding publishers of fictitious information about business cash advances and commercial mortgages. We are providing more detailed suggestions for avoiding this growing problem in the discussion below.

The use of reputable publication sites is one of the most effective ways to avoid fake commercial financing articles. These trusted sites will employ their best efforts to eliminate articles for which the author does not have ownership rights. The best of these high-quality and responsible sites will require review of articles by a human editor prior to publication. Most of these websites will provide detailed contact information for the author. Some especially-thorough sites require authors to submit sample articles to demonstrate effective writing capabilities before publication.

For articles not published on an established site, some detective work might be necessary. The absence of detailed contact information can indicate that the site is more interested in having visitors click on advertising links rather than facilitating getting in touch with someone associated with the website. The worst offenders will typically steal content previously published on trusted sites such as those described above and remove the resource box (thus eliminating contact information for the author).

The best indicator of questionable content on these ethically-challenged sites is often the prominence of articles which do not always make sense if you read them closely. This occurs because many such sites use software to scour the internet and to publish an article based on some random combination from a variety of sources. The resulting content provides selected keywords which is designed to bring search engine traffic even if the content itself does not make much sense. For these questionable sites, unintelligible articles often mean that a visitor is more likely to click on a paid link that appears to be relevant to their own keyword search. In other words, most of these low-value sites actually prefer that the content itself will not make sense to a reader because their game plan depends on visitors clicking on paid advertising links.

There are currently many commercial financing sites which provide only their contact information along with an article originally published elsewhere by an expert for commercial loans. These sites will remove the legitimate resource box for the actual article and represent the work as their own. There are several strategies which can help with this situation.

First, use a prominent search engine to perform your own review of other business financing articles published by the author. If articles can only be found on the one website, at a minimum this suggests that the author is certainly not a commercial loans expert. This is in itself an important finding, because business cash advances and commercial real estate loans are more complex than they might appear, and most business owners simply cannot afford to work with inexperienced working capital advisors.

Second, a detailed conversation with the indicated author will be informative. Ask about where other small business loans articles they have published can be found on the internet. The critical importance of such interactive discussions between business financing advisors and business borrowers cannot be emphasized enough since business owners will eventually need very personalized help with their working capital cash management. The likelihood of getting such individualized attention from this particular source will be obvious after a candid discussion.

Third, we previously recommended the use of established article websites. Many of these are now providing an author widget which is very helpful in providing a practical overview of work published by a specific author. Those sites without such a widget are likely to provide a summary index of articles by each author. The widgets or other summaries will quickly demonstrate how many articles a particular author has written. An author well-versed in commercial financing is likely to have published articles about topics such as credit card processing, SBA loans and business opportunity financing. It is suggested that commercial borrowers review a few pertinent articles in their entirety to help determine whether the author is a commercial loan expert that appears to be capable of helping with their specific business financing situation.

Credit Reports – How They Are Compiled

Have you often wondered what information is in a credit report? Many consumers are not fully aware of all of the items that are in the finance reports, and how that can affect their ability to get any kind of credit from a new loan to credit cards. The information that is in the credit report is on all of the credit that you have had, the payments that you have made, and shows any of the negative accounts that you may have. It is important to take care of these items before you are going to try and apply for credit or a loan because if your credit is poor, you may not able to get the money that you need.

If you do find that there are negative items on your finance report that may be affecting the credit that you can receive, it is better to take care of them first and clear up the negative items on the credit report. Once you have cleared any of those items up, you are able to go forward with applying for new credit and improving the credit score. Lenders carefully look at all of the items on your finance report before they approve a credit card or loan, so it is important to know what kind of information is on your credit report before you try to make a big purchase, or apply for a loan with a lender. The amount you have to pay in interest can also be a factor.