Equipment Leasing: When To Use Leasing Over Financing
Depending on the type of business you own and the type of equipment you need, you may find you financial help when something breaks or needs to be replaced. If you need something for a short period of time or have a project requiring a special tool, equipment leasing can help you out.
Before you decide on the right lender for your lease, make sure you consider a few of these issues listed below:
- What will be the total repayment cost?
- Can you bundle services into one contract?
- How long will you need the equipment that you are renting?
- What type of equipment will you need?
- How long has the company been open?
- Who covers the damage if something was to break?
- Do I pay personal property tax?
- Who covers the general repairs?
Because every business has different needs, there isn`t a standard leasing plan or objective. It works well for businesses’ who can`t come up with the substantial capital needed for outright equipment purchasing. It may also be beneficial if your company doesn`t have the credit or substantial business operations to sustain a monthly payment for an equipment loan. You may only need the item for a brief time, and a long-term financing plan isn`t sensible. If you are also worried about maintenance and repair, a lease generally provides these services. You should make a list of the pros and cons of financing versus equipment leasing.
When you decide to lease, it is very important that you look over the agreement carefully. Make sure you ask any questions and know the terms. You do not want to sign a contract that has hidden fees or additional costs. Both leasing and financing will have a more manageable monthly payment instead of a large sum at once, but it also will cost you more in the long run. You are making smaller payments, but you will be paying back several thousand more in interest fees.
Equipment leasing can be difficult to obtain if you do not have a strong enough credit history. Sometimes, the leasing company will allow you to use your personal credit score if your business is brand new. Check with the supplier to find out their leasing requirements, and work to achieve what is necessary long before you need the new equipment. Having a strong credit score has always been a positive for equipment financing!