Back in the day business owners had to grapple with purchasing new equipment. This made it difficult to disrupt the budget and cash flow. For this reason, business owners resulted to lease equipment as it spreads costs. As a newbie, you may encounter challenges maneuvering through equipment leases. Here is a simple guide on how to approach equipment leasing.
Defining Equipment Leasing
Equipment leasing refers to the process of renting equipment such as machinery and technology for a certain period. This means that you are not going to purchase equipment. It is worth noting that you can renew an equipment lease upon the lapse of the lease period.
What does Equipment Leasing Entail?
Before acquiring leased equipment, you must enter into a legally binding agreement with a vendor or equipment owner. The agreement has details on the cost of payment per month and the period of leasing.
However, a bad business credit score can force you to pay more for equipment leasing. Therefore, it is advisable to maintain good credit scores while assessing the type of equipment leased by various owners.
Merits of Leasing Equipment
The growing popularity of equipment leasing is associated with various benefits for small business owners. Here is a list of benefits.
-Upgrade- this means that you can upgrade your equipment to keep up with new technology or increase productivity.
-Offers a tax credit
Despite saving you from high upfront costs, equipment leasing involves payment of high interest. For instance, you may be forced to pay mandatory service packages such as storage costs. This can result in an overall increase in equipment costs.
Types of Equipment Finance Providers
There are three main types of equipment finance providers namely:
Leasing Broker– they help in the heavy lifting of services such as paperwork.
Independent Lessor– they include third-party lease providers such as banks and lease specialists.
Leasing Company– refers to the subsidiary leasing arm of dealers or manufacturers.
Hedge Commercial Capital has been proved to be a worthwhile equipment financing partner. Call us today for custom solutions.