ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: Why Lease Equipment Anyway??

Tuesday, June 5, 2007

Why Lease Equipment Anyway??

I am asked this question alot and the first answer that comes to my mind is this: 'It's much easier and safer to lease equipment than buy it'. Why is that??

Ease: Leasing equipment is easier than buying since the majority of the time the small business owner doesn't have the cash available to buy the equipment outright. This means going to the bank to try to borrow the $$ to buy it. If you do have the cash and it doesn't hurt your working capital situation then by all means use the cash to buy the equipment.

When borrowing from the bank, this means jumping through all the bank underwriting hoops required, and those hoops are the same whether the loan is for a 40k piece of equipment or a 40 million dollar commercial property. Anyone who has ever gone to a bank knows there's many steps and chance for them to reject the application at each one.

Leasing however is far easier. The equipment itself is the collateral so if you don't pay the leasing co. just comes in and takes the equipment back. The same 40k piece of equipment in my above example would fall under 'Application Only' guidelines meaning literally a credit application is the only thing required for an approval decision. Sounds alot easier to me.....

Safety: It's safer to lease equipment than pay cash for it because our small business owner clients seem to always be short of cash. Working capital is vital to the small business. More businesses close their doors due to the one unexpected expense occurring that leaves them with ZERO cash, rather than being poorly run on a day to day basis. Leasing is an inexpensive commonly accepted financing technique that allows for payments to be made over a 3-5 yr time period. We tell our clients all the time, if you are going to use the equipment for 3-5 yrs, why not pay for it over 3-5 years instead of depleting all your cash now??

It just makes good business sense due to its ease and safety features for your working capital to lease equipment and pay it off over time.


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