During National Small Business Week, May 1–7, 2016, the Equipment Leasing and Finance Association (ELFA) is sharing five important steps for small businesses to get started leasing and financing the equipment they need.
According to ELFA, most small businesses require equipment in order to operate and grow, and each business must decide on an acquisition strategy that is right for them. A majority of businesses turn to equipment leasing and financing so they can take advantage of a range of benefits.
“The $1 trillion equipment leasing and financing industry helps all types and sizes of commercial businesses acquire the equipment they need to conduct their business operations,” said ELFA president and CEO Ralph Petta . “For small businesses in particular, which may not have access to as many funding sources, equipment financing offers flexible, budget-friendly options that can help with cash flow and keep equipment up-to-date. We’re pleased to share five steps to ‘equip your business for success.’”
ELFA shared the following steps that businesses can take to get started leasing or financing equipment to their strategic advantage:
1. Consider how you will be using the equipment - Determine how your company will use the equipment and the length of time you’ll need it. To help decide if leasing or financing is a profitable financing option for you, perform a simple cost/benefit analysis by comparing the anticipated costs to the revenue you expect to generate from using the equipment.
2. Find an equipment finance partner who understands your business - It is beneficial to work with an equipment leasing and finance company that understands your particular market. The company’s understanding of market fluctuations and other factors that impact your business can greatly affect the successful outcome and desirability of your lease contract. It is also important for the company to understand your business’s tax and cash flow requirements and be able to set the residual rates (the value of leased equipment at the end of the lease term). Your equipment financier can serve as a valued consultant, providing additional benefits through lifecycle asset management solutions.
3. Calculate your total payments and costs - Review the number of payments you will owe, the total monthly payment due and any additional costs related to insurance, taxes and other charges. In addition, find out if there are additional costs associated with the lease or finance transaction that may occur during the course of the agreement term, including late payment fees and other surcharges.
4. Understand the terms of your agreement - Review the provisions of the agreement with your equipment finance company representative. Make sure you understand your company’s liability for the equipment you are leasing or financing, and consider questions such as:
● Will the equipment finance company assume the costs for the equipment’s insurance, taxes and maintenance?
● Will the equipment finance company handle installation, maintenance, asset management and tracking and other services, or are these services your obligation?
● How can you upgrade or add equipment under this agreement?
● What are your options at the end of the agreement?
● What procedures must you follow if you choose to return the equipment?
● Are there any extra costs at the end of the agreement?
5. Close the deal - Once you have answered key questions and determined that equipment leasing or finance can benefit your company, it’s time to start enjoying the benefits!
For more information about how equipment finance equips business for success, visit www.EquipmentFinanceAdvantage.org. This site includes a digital toolkit, articles, informational videos, definitions of the various types of financing, a lease vs. loan comparison, questions to ask when financing equipment and a searchable list of equipment finance providers.