Equipment Financing

• Quick access to cash
• Limited paperwork
• Equipment serves as collateral

Summary – Equipment Loans

Equipment financing can be a sound option for expensive equipment that’s not going to become obsolete or quickly worn down. Examples of items that may fit for equipment financing include, industrial trucks, automated machinery, machine shop tooling, generators, chillers, large format printers, car wash equipment, trucks, trailers, commercial refrigerators, agricultural equipment, or any other equipment that can be used by a business that carries significant expense.

• Low up-front cost
• preserves cash flow
• avoid maintenance cost

Summary – Equipment Lease

The two primary lease types are operating (short term), and long-term. Operating leases allow companies to obtain equipment with minimal upfront cost. The primary motive for leasing is cash flow – the ability to get equipment now without a major expenditure of cash. Leases are classified as “small ticket,” “medium,” and “large ticket” leases based on the value of the equipment to be leased. The small ticket lease covers items up to $100,000 in value; large ticket leases cover item costing more than $2 million. There’s a long check list that needs to be considered before leasing (lease duration, payment due the lessor, financial terms, etc), Credxpress will help you understand if leasing is a good option for your small business.

Lease – Options

Closed-end leasing:

This type of lease is also known as a “true lease” and “walk away lease,” as it does not entail any type of purchase obligation before or at the terminus of the rental. One advantage of this type of lease for the lessee is that it negates risks associated with depreciation, or the calculated value that a fixed asset loses each year. This is often the most flexible, cost-effective form of a lease, and is the best choice for any asset that loses its value quickly.

Finance leasing:

Also known as a capital lease, an agreement in which the lessee will own the equipment at the lease’s terminus, generally for a fixed percentage of the original value or $1 past the full value and interest in the payment structure. The lessee is often responsible for paying the lessor ownership costs, as well as handling insurance, maintenance and tax expenditures related to the fixed asset, making this the best choice when the lessee is certain that he or she will want to purchase the item at the end of the lease.

Gross lease:

Mostly used to describe a commercial real estate lease, this agreement is characterized by the lessor’s responsibility to pay associated building costs, such as maintenance, taxes and insurance. The lessor does have the right to adjust the agreement, so as to better oblige all tenants’ specific demands.

Lease purchase:

This agreement often includes either a mandatory obligation to purchase the equipment or real estate at the end of the lease’s payment period, or an option to do so pending the lessee’s preference.

Skip Lease:

An agreement in which certain payment dates are skipped per the lessee’s request and lessor’s approval. This offers more flexibility, making it a good choice for businesses with inconsistent cash flow.