Equipment leasing is a type of machinery finance where small business owners buy machinery to start their business and pay the money for that machinery over a set period. Many people confuse equipment leasing with equipment financing. In the latter, you own the equipment after paying for it in a set period, but in the former, you do not own the equipment. The process takes more money in the long term; however, it provides the people with small businesses a gateway to start their business.
How does the equipment lease work?
Once you have decided that you want to lease a piece of equipment for your business, you approach an equipment vendor. The vendor makes a lease agreement. It has all the information on it, such as the time you will have the equipment, the number of equipment you want, and any surcharges in the future.
The lease payments differ from vendor to vendor. Your reputation in the market also determines the lease cost. If you are someone to whom giving equipment is seen as a risk, your lease payments will be much higher than the average business owner. You also have to decide which vendor you require. For that, you have to know which equipment you want, and then you need to search for the appropriate vendor.
Machinery leasing periods typically range from three years to ten years. It also depends on the equipment. After the lease is expired, you have the choice of renewing it, giving the equipment back or purchasing the equipment.
You need to understand that this lease is not a loan, which means it will not appear in your credit report. That means you can still borrow money from banks.
What are the benefits of equipment leasing?
There are several advantages associated with equipment leasing;
If your business is continually expanding, that means you would need always to upgrade your equipment. If you buy an equipment, you would be stuck with that equipment. But, through leasing and equipment, you can easily upgrade it and even get more gear. You would like to need to upgrade your same lease document.
If your business is new and you do not have much money in your pocket, you need not worry. Most of the times, lesser do not demand a considerable amount of down payment. The money they require is affordable for almost any new business owner.
Lastly, most of the equipment leases are eligible for tax credits. That means you get to save a fair amount of money.