For anyone starting a new business venture or expanding an existing one, there is always a dilemma of choosing between business loans and capital equipment financing. The business loans vs. equipment financing debate have been going on for some time. Although both business loans, as well as capital equipment financing, have their merits, the later though has got its unique advantages, which is the focus of this article.
Although you can purchase the equipment that you want after getting a business loan, you will be paying for it even before it becomes productive. This is one point which shows that is the winner in the business loans vs. equipment financing debate.
Another advantage that capital equipment financing has over business loans are that you are spared from paying a significant down payment. The initial down payment that you pay towards obtaining a business loan can always put a strain on your company’s cash flow compared to equipment leasing. This is one of the major advantages that capital equipment financing has over business loans.
Another advantage that shows who the clear winner in the business loans vs. equipment is financing is the fact that you do get greater tax benefits with the later. With so many advantages, capital equipment financing emerges as the clear winner in the debate.
Equipment leasing is the preferred choice of several businesses when it comes to capital purchases. With years of experience behind the product itself, it offers a broad range of options for the business. Capital equipment financing products come in all sizes and make sense irrespective of whether you are a start-up venture or an existing corporate entity.
For instance, a financing option for someone who wants a bucket truck would be far different from that of someone who wants to install a solar panel in his manufacturing unit. Make it a point to work in close tandem with a lender that specializes on the type of industry and asset, understanding their needs and then approving their application in a quick, timely manner will make a difference whether your leasing lender know your business, equipment, and industry. Your credit profile helps suggest the right capital options for your business.
Questions each small business owners whose considering financing equipment must answer before applying for a lease
- How many years of management experience do you have?
- How many years have you worked in this industry?
- Describe the history and nature of the business. (Write at least 3-4 sentences.)
- How is your business unique? (Write at least 1-2 sentences.)
- Describe the length of time in business under current management, a brief description of the current management team, and the depth of management experience in this industry or a related industry. (Write at least 3-4 sentences.)
- How many jobs will be this has created as a result of this lease?
- How many jobs will be this has retained as a consequence of this lease that would have been this has lost otherwise?
- Are any of the business products or services exported or do you plan to begin exporting as a result of this equipment purchase?
- Has an application for the lease you are applying for now ever been submitted to SBA, or to a Certified Development Company or lender in connection with any SBA program?
- Will more than $10,000 of the lease proceeds be used for construction, install, training and support?
- Will this lease conserve working capital and will this be to refinance existing equipment debt, to purchase new assets for business expansion?
When it comes to providing business equipment finance and equipment leasing, find a lender who is an industry leader not just in the industry but as a nationwide lender who can accept clients all over the continental US. Business equipment finance is something that needs specialized expertise.
Several leading companies have already benefited from our skills and can vouch for our services. We firmly believe in providing our customers with true value for their money. It is this commitment that has made us the preferred choice whether it is used buy used bucket trucks or it is to lease office equipment. You can get in touch with our team today and get to know more in detail about some of our services including, $0 down & deferral payment plans, operating leases, and 100 % financing.
The process for leasing equipment
Liberty Capital is the nationwide industry leader in providing quality capital financial services and capital equipment leasing. Providing our lessee with quick approval and subsequently, funding has been one of the reasons for our remarkable growth. So whether you are looking for capital equipment leasing or capital financial services to expand your business, you need not look any further than E Lease Equipment. Our system is so designed to ensure speedy approval. We first of all try and understand thoroughly every client’s unique needs and then provide them with the appropriate solution.
Quick application process
If you are a business looking for capital for either starting a new venture or expanding an existing one, then we can provide you with capital financial services towards making your dreams come true. We have made a conscious effort to make your job easy. You just need to fill out our one-page lease application. You can now get private equity capital up to $150,000 without financials or tax returns. The underwriter will confirm the receipt of your application. It can take up to 48 hours for the approval process to be completed. The ease of the procedure is what makes Liberty Capital the number one choice of those looking for direct capital funding.
The process after the approval
Typically, lease specialist will contact you as soon as your application is approved. This is to ensure that they go over your approval in details. You will need to send the final invoice which contains detailed information on the type of equipment that you want to lease, extras and the total cost. The entire post-approval process has been designed to make the customer’s job a lot easier.
The documentation process
Once your application is approved and processed, the documents are then sent to you for your review and signature. They are either sent via overnight delivery with a prepaid return envelope that you can use to return all the originals to the lender or directly to you via email. Typically, salesperson put forth adequate care to ensure that no delays occur due to reasons whatsoever in delivering and executing those agreements.
Release of funds
Typically, funding department will contact you to authorize the release of funds once all signed documents have been submitted. No funds are released to the seller without this procedure. If you are satisfied with the equipment, you can always verbally verify it. All systems go meaning that equipment has been delivered, installed and is in operational. This last procedure is designed in such a way to ensure the total satisfaction and execution of the lease agreement.
During the verbal verification, you can always confirm you lease buyout. Typically, at the end of the lease term, you can now buy the equipment for a very, very nominal amount of, believe it or not, $1, unless, specified with a Fair Market Value. Companies that intend keeping and continue using the equipment at the end of the lease term will find this option perfectly suited to them. Also known as Capital Lease, an increasing number of companies are opting for this option these days.
FMV Lease Buyout
Big residual or balloon payments are becoming less and less utilized as most often lenders are willing to lender over 100% of the cost of the asset, unlike mortgage loans. One of these buyouts is the 10 or 20 percent lease buyout option balloon due at the end of the term or return the equipment back. This is not a unique option that you can find in the industry. This option is a combination of a capital lease and a true lease. Companies have the option of returning or buying the asset at the end of the lease term under this option. Companies usually choose this option when they want a lower monthly payment.
Operating Lease or True Tax Lease
The true lease is one such option which is specifically designed to meet certain tax guidelines that are stipulated by the Internal Revenue Service. Under this option operating leases can opt for what is known as an ‘off balance sheet’ funding. This way the lease is recorded neither as a liability nor as an asset. You will need to check with your accountant whether your leasing arrangement can qualify for such true operating lease.
Equipment Finance Agreement (known as EFA)
Under this option, you can finance the purchased equipment with no specific buyout or end term option. You simply own the equipment at the end of the term without any clause of the purchase option. This is a popular option for many companies since it allows them to own the equipment out right from the time of purchase. This eliminates the guessing game of what the balloon payment would look like at the end of the term. There are many benefits to this as opposed to the leasing but each has its idiosyncrasies.
Use now, pay later – aka deferred payment plan
Deferred program for equipment leasing has always been there but rarely opted due to complexities for the reps to explain and the complication of the process for the type of deferred program available. For example, contact payment of $25 for the first 90 days and normal payment resumes at a normal team; then the term gets extended or reduced depending on the lender. Reducing the term will increase payment and increasing the term will lengthen the term for the amount of time it was deferred. Companies, who want to use equipment that won’t be generating business revenue for them during the initial 3 to 6 months time, generally choose this option to conserve working capital. The lease is so designed that these companies need to make only very nominal contact payments during the initial months. In some cases, they need not make any payments too. Such capital equipment financing options have made it easy to handle for certain business such as farmers, manufacturing who acquires the equipment before generating revenue.
Pay based on the seasonality
This finance option has been designed keeping mind the unique requirements of businesses whose cash flow is seasonal. You can now make your payments during particular season chosen by you if you qualify for the seasonal business payment plan where the deferral program applies.
Very few will refinance equipment lease due to its complexity and the fact that assets are typically depreciating. This option is for those who have already financed big-ticket items such as jet or airplane financing where they refinance the balloon payment if there was a residual term at the end of the initial term. The financial institution should give you a payoff quote for you to be able to avail this option. So they can determine the new term and new desktop appraisal to determine the new value of the used equipment being refinanced. Typically, this occurs when the term was short, to begin with, and want to lengthen the term to converse cash and have the lower buyout.
Equipment Pays For Itself – Leasing allows the asset to be paid for as it generates revenues if it’s used as the business essential revenue generating equipment. Not all equipment is income generating equipment. A sign will not generate revenue but still can be financed and amortized over the full life of the asset.
100% Financing – Typically there is No Money Down with equipment leasing.
Unlike banks which often require 15%-20% down payment, it’s common to lay out only the first or last payment just like a commercial lease or vehicle leases. Some leasing lenders will require you to pay the taxes and other fees and only finance the true capital cost without additional fees added to the leasing term.
Fixed Rate and Payments – Leasing equipment does not hinder budget restrictions because lease payment is fixed unlike banks as their rates are based on Prime Rate. As a result, banks will offer variable rates as opposed to fixed rates. The big benefit to equipment leasing is the predictability of the monthly payments.
Tax Savings – Often a lease can be written off as a monthly expense at the pre-tax earnings instead of after-tax profit, as what depreciating equipment would. Lease payments may be fully deductible, consult your tax advisor for more information.
Off-Balance Sheet Financing – Operating a lease is not considered long-term debt or liability, so it doesn’t appear on the balance sheet within your financial statements, making you financially sound to a prospective lender for future capital acquisitions.
Conserve Working Capital – In a growing economy, cash will be very important for liquidity reasons; therefore, cash should not be tied up in equipment purchases. Compare a monthly payment to a large cash outlay.
Application Only Program – With leasing, your financial statements maybe are unnecessary if your transaction amount is below $100k. With loans, financial statements, as well as tax returns, are almost always required.
Equipment Leasing advantages to the small business owners:
- Preservation of Line of Credit & Working Capital
- TAX RETURNS Unnecessary
- Delivery to installation, taxes all can be added to the lease payment
- All types of credit accepted including start-up businesses
- Quick and simple approval process
- New or used equipment for any industry including vehicles
- FMV/Dollar buyout leases
- 100% Financing or Lease to own
- Flexible Term with deferred payment options
- Tax Savings based the lease type
Equipment Leasing advantages to the equipment dealers:
Vendors have realized that offering lease financing solution to customers offers an Added-Value service on the top of the excellent equipment they already sell. Vendors nationwide have experienced vendor program for its efficiency and convenience.
By providing your customers a source of capital, it will save them the hassle of seeking their own. Typically, a quick approval with fewer paper works and funding within 24 upon receipt of all original documents for those well-established vendors with very predictable customers.
Typical leasing programs are suited to vendors selling new and used equipment starting from $5,000 to $250,000.
Below is a list of advantages to vendors and customer purchasing equipment.
- Payment to you immediately after funding or pre-funding
- Participation program meaning a discounted rate or rebate
- Deferral & Seasonal Programs
- Overcoming budget constraints
- New or Used Equipment options
- Pre-funding available before shipment/delivery
- 0% Down Payment
- 24 hours Approval
- 100% Financing
- Lease to Own
Superior customer service and knowledgeable underwriters will give strength to your application review. You will be assigned w/ an experienced underwriter to handle your capital needs from the application process to funding process if you work with Liberty Capital. All our underwriters have extensive experience in business loans, equipment leasing, and business cash advance.
The size of our loyal customer base requires no explanation. We have actual testimonials from funded clients that will be glad to give references, personally.
Look no further for your 2017 equipment financing plans to maximize your tax benefits. Plan, execute and deliver.