As a small business owner, there’s no doubt you’ve weighed the benefits of equipment leasing. And with recent reports highlighting how difficult it is for some businesses to find the loans they need, there’s no doubt the idea of leasing instead of buying has become more attractive.
The most recent Small Business Credit Survey from the Federal Reserve Bank of New York showed that while businesses throughout New York, New Jersey, Connecticut and Pennsylvania were seeing an increase in loans for $1 million or more, loans for smaller businesses seeking lesser amounts were at the same levels as in 2005.
With 81 percent of businesses surveyed looking for loans of $500,000 or less, it’s clear that small business owners are struggling in the current market.
This is where leasing comes in extra handy. Unlike with loans, which may require compensating balances, large down payments, client list reviews and cash flow projections, leasing is a fast, streamlined process.
Of course, there are other advantages as well. These include:
- 100 percent financing
- Tax benefits
- Improved balance sheet management
- Access to more modern, high-end equipment
A wealth of choices
Equipment leasing isn’t a one-size-fits-all affair. That’s why it’s important to explore the different types of equipment leases available to you before making a decision.
One popular choice is known as a purchase option. When your lease ends, you can either purchase the equipment at its current market value, renew your lease, or return the equipment. Buying at the end of your lease can be a much more affordable option, as there’s a good chance the equipment will decrease in value over time. Otherwise, simply renewing your lease can keep your operations running smoothly without a significant cost.
Meanwhile, the dollar-buyout lease has much to offer. This arrangement allows you to purchase your equipment for a single dollar at the end of your lease term. For businesses that know their equipment is not likely to lose value and want to keep it when their lease is up, this option makes a lot of sense.
A high-cost equipment lease may be your best bet if you require equipment that costs more than $100,000. By using this lease, you can avoid the sizeable bite into your credit that taking out a traditional loan would result in.
In short, there’s no shortage of options for businesses looking to tailor leasing options to their specific circumstances. The key is to work with people who understand your needs and can help manage the process.