Equipment leasing is when a lender buys and owns equipment and then “rents” it to a business at a flat monthly rate for a specified number of months. At the end of the lease, the business may purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing, lease new equipment or return it.
In qualifying for a lease of $100,000 or less, personal credit of the guarantors or owners will be used in making the approval decision. Keep in mind, leasing is usually more expensive than bank financing.
When applying for less than $100,000, an application is generally no more complex than a credit card application. Leases for more than $100,000 will usually require detailed financial information from the business with the leasing company conducting a more thorough credit check than it would for a smaller transaction.
You can start by getting a quote from the leasing firm referred by the company that wants to sell you the equipment. The quote should be competitive. Keep in mind, the company you are buying the equipment from wants to sell as many as possible, and won’t stay in business by referring a leasing company that gouges its customers. REMEMBER always get at least two quotes. Either ask the company selling the equipment for more than one leasing company or ask a friend or a business associate for a referral.
Note, when looking for a leasing company you should know whether you are talking to a broker who is structures the deals or she works for leasing company that is actually putting its own funds on the line.
Broker’s can be a benefit, especially if you have a quote from a direct source (company that is actually funding the lease). He or she might have a solid understanding of the marketplace and know where to go for the best lease that fits what you need. Though this may generate savings in greater than the cost of the broker’s fees, always keep one thing in mind when working with a broker: Buyer beware.