Prospecting Equipment

Many people today dream of owning a business. Being your own boss can be liberating, not to mention profitable. However, small businesses have a disturbingly high failure rate and the new owner wants a prospect with a proven history of success.

Franchises give entrepreneurs the opportunity to open a business with an established regional or national brand identity. With a plan to follow and experts to consult, your chance of success soars. Franchising is the path of choice for the slightly more conservative entrepreneur.

The downside of franchises is that they are often quite expensive, more so than starting a business under your own name. Coming up with the initial capital can be tough and preserving your assets is paramount. One of the largest expenses is equipment financing. When stocking your franchise with equipment, leasing rather than buying is the more cost effective solution.

Start up equipment leasing

The initial franchise fee buys you assets such as the right to use the brand, initial training, and long-term consultation to keep your business running profitably. You still need to acquire the equipment necessary to run the business.

For example, let’s say you buy a franchise of a successful, well-recognized steak house but you need tens of thousands of dollars worth of stoves, tables, and plumbing fixtures. Rather than taking out a huge loan to equip your restaurant, equipment leasing allows you to get the kitchen and dining room furnished without depleting your valuable capital.

Financing upgrades

When you own a franchise, you aren’t truly your own boss. You still have to make changes at the whim of the parent company in order to preserve the brand. Sometimes this is something simple like integrating a national ad campaign into your local marketing efforts or changing a few options on the menu. Sometimes it’s more complicated and expensive.

Parent companies look at the national or global impact of their decisions and project the financials years in advance. They reason that a short-term loss in assets, say from upgrading their restaurants nationwide, is worth it for a long-term boost in profits.

On the multi-billion dollar corporate level that might be fine, but the cost of upgrades can be devastating to the local franchise owner. Small business owners don’t have the deep pockets of the parent corporations and it can be daunting to face the prospect of substantial debt in the hope of future profit.

For a small business, equipment leasing allows significant upgrades to be done in a more cost-effective and less financially damaging manner. You don’t have to squander your resources nor risk your credit rating on expensive new purchases.

Although you may be part of a national or global franchise, you are actually a small business owner. You have the benefit of consulting with experienced support personnel at the parent company, but you are operating on a tight budget and can’t afford huge equipment costs. Equipment leasing is the smart choice for franchise owners.

If you own your own construction business, most likely you’ll need to buy new equipment when you’re just starting out or will have to add to an existing fleet of construction equipment. Is your business in the position to pay cash and still have an emergency fund left over? Most small businesses can’t and will need to find equipment financing.

If you need help with construction equipment finance, it isn’t as easy as walking into a store and buying the first thing you see. Instead you’ll have to research and figure out what equipment you need, decide if you want to buy a new or used piece and then talk to a bank or construction equipment finance company about a loan.

What Kind Of Equipment Will You Need?

The first thing you’ll have to do is determine what type of construction equipment your business needs. It’s a good idea to tell the construction equipment finance company what you’re looking for so they’re able to give you the right type of loan. A truck used to get between job sites will have different loan terms than a less expensive piece of equipment.

Can You Afford New, Or Is Used The Way To Go?

Is your equipment financing going to be used for new construction equipment or would you like to shave a few dollars off the price by buying used? After determining what type and brand of equipment, it won’t hurt to look into the used price. If the construction equipment is going to be used as primarily a back-up, buying used might be a good idea. You can usually find used equipment that’s reliable enough for daily use, so do a little research and see if buying used makes sense.

Look Into Construction Equipment Finance Companies

Even if you have the available cash to buy immediately, looking into construction equipment finance companies for your equipment financing is a good idea. That way you’re able to hold onto your available cash in case of a business emergency. Many people immediately think of their local bank branch when looking for a loan. Local banks can be a good place to begin, but a company that specializes in equipment financing will have more knowledge on construction equipment finance.

Look for a company with their own underwriting department. Having that in-house means you’ll have a shorter wait for an answer to your application. You’ll also receive your money faster which means you won’t have to wait long to order the equipment you need.

You can also find equipment financing companies that offer leasing and that can be a great, lower-cost solution for seasonal businesses or companies that are just starting out.

If you’re concerned about tying up your available business funds, look no further than a construction equipment finance company when it’s time to add to your equipment inventory. Because they deal with equipment financing on a daily basis, they’ll be a great resource for your business.

In order to run a business smoothly and effectively, it is vital that business owners have access to all of the equipment and supplies that are required by their industry. A construction company cannot function without its workhorses, a corporate office needs computers and other technology in order to reach out to clients and business partners, and restaurant owners cannot deliver their specialties to hungry patrons without the right kitchen equipment.

However, many businesses cannot outright afford these vital pieces of equipment, and are at a loss of what to do until they can bring in the right equipment that they need. This is where the concept of equipment leasing and used equipment financing comes from. It allows companies to get the supplies and equipment they need even when they cannot outright afford to purchase them.

Equipment Leasing

There are numerous benefits to equipment leasing, three of which make the process of equipment leasing more logical than trying to buy the equipment on your own. Equipment leasing from companies specializing in equipment rentals offer quick approvals because each and every request is reviewed personally. Equipment leasing also offers unique, flexible terms including seasonal schedules, custom terms, and stepped payment plans.

Finally, with equipment leasing you can expect a minimal amount of paperwork, including an extremely short and easy application form to get the ball rolling. Because most companies that lease equipment are direct underwriters, they can individually review and approve your request without having to involve a middleman. Because these companies are not governed by the same restrictions that banks are required to follow, competitive rates can be offered that benefit businesses desperate to get the equipment and supplies they need.

If you have a business that is well run, but your industry is tough to finance, or if you are looking for terms that are both flexible and take your unique needs into account, then either equipment leasing or used equipment financing may be the right option for you.

Used Equipment Financing

Used equipment financing is another excellent option for businesses that cannot operate without the necessary equipment, but also cannot afford to finance the equipment on their own. Financing solutions from used equipment financing companies are usually excellent for businesses that are struggling with a limited cash flow but that cannot allow that to deter them from getting the equipment they need.

Used equipment financing is offered for a large variety of different industries, including construction, industrial, office and computer, landscaping, restaurant, transportation, recreational, seasonal and a great deal more. By financing used equipment, businesses that are low on cash flow can still get the equipment they need, but they do not have to pay what new equipment would cost. This is the main reason why used equipment financing is such an advantageous avenue for startup companies. New businesses and industries inherently difficult to finance will especially benefit from these business solutions.

Equipment Leasing Overview

Equipment is a fundamental part of any business, whether small or large. It is with equipment that businesses render the services that they do. The quality and quantity of equipment a company uses, together with how the company deploys such equipment makes the difference between success and failure in a highly competitive economy.

When it comes to the hardware of a business, companies often prefer to go the extra mile to purchase equipment that will give them an edge in whatever industry they operate. While this quest for better machinery is laudable the methods in which it is obtained are not.

Purchasing equipment off manufacturers’ shelves is a decision most companies choose to take and they do so quite wrongly. In a business, the value of an asset is in its use and the value of that same asset depreciates with its use as well. Equipment is an asset, which satisfies this truth only too well, you buy some expensive piece of machinery, which looks good on your balance sheet, and in the next 4 years its value depreciates to nothing.

Equipment Leasing is the correct option as opposed to buying when your company needs equipment. Equipment is a tool that must be used to its maximum capacity to provide the service your business offers. In this light company should aim to save themselves the wanton waste of money that goes with purchasing equipment and should explore the benefits that come with leasing equipment instead.

Leasing equipment is not an aim at cutting corners or reducing the needed service quality delivered by a business. Equipment leasing is a proactive means of increasing your company’s cash flow that would otherwise be tied down if you considered the purchasing option. This cash flow could impact on other areas of your company’s business and improve your company’s balance sheet in the profit columns. Cash should not be tied down in a quickly depreciating asset such as bought equipment.

Benefits of Leasing

If you’re considering leasing equipment for your company rather than buying, you’re not alone. Statistics have it that over 80 percent of U.S based businesses lease their company equipment as opposed to buying, so you can remain rest assured that it’s a wise decision. To support this fact we offer you some of the financial benefits of commercial equipment leasing.

Financial Benefits of Leasing

These financial benefits of leasing cover how leasing helps your business improve its financing either by saving money or making more money for your company. The list is hardly exhaustive but the points examined here are the strongest and reflect the areas of finance that are most important to a business.

Increased Working Capital – With equipment leasing you save yourself the cost of buying the equipment outright. The money you save from purchasing the equipment can be deployed into other areas of the business. Obtaining a business equipment lease also preserves the line of credit you have from your bank as the financing you use to obtain the leased equipment is much lesser outright purchase. By saving this money you can improve your business edge with the right equipment, turn a better profit and not only retain your existing credit line with your bank but improve it as well.

Improved Balance Sheet – In business the balance sheet is an all too important area of determining performance, not only to your shareholders but also to people who provide major financing such as banks and prospective investors. This improvement comes in various areas: first of all business equipment leases are not recorded as liabilities and thus do not have a bearing on your capital figures. The second area covers the fact that a fixed equipment lease eliminates the need for depreciation, if you had purchased the equipment the cost of the equipment is written off according to use and affects your balance sheet calculations.

Tax-Related Advantages – With a commercial equipment lease your expenses are listed as direct operating expenses, which ultimately lead to a lower taxable income for yourself and your company. Another advantage that makes sense when you compare your leasing arrangement to a purchase is that if you had purchased the equipment, sales tax would then be applied and added to the costs accordingly. In some cases when you lease equipment, sales or use tax is then deducted according to the use of the leased equipment. Whatever the case you should consult with at tax professional to examine the benefits that apply to your company specifically in a lease situation.

Equipment leasing is intelligent decision making, especially when compared to bank loan financing or cash purchases. Investing cash reserves in equipment makes the business enterprise asset rich and cash poor. When a business is cash poor, it is severely limited in its ability to take advantage of new opportunities or to adequately respond to changing market conditions.

Today, more than 80% of all U.S. corporations lease some or all of their equipment. It is the use of equipment, not ownership of equipment that generates profits. This simple precept explains the rise of equipment leasing activity, especially as equipment life cycles shorten in this high-tech age. Whether opening a new business, expanding existing facilities or opening an additional location, the method you choose to acquire equipment can have a profound impact on your business, credit and cash flow.

Secret #1:

Virtually all types of equipment in almost any industry can be leased. Leases are specific. You can choose the manufacturer, the model number, the source and even accesories. You’re covered by all conventional manufacturers’ warranties. And because lease payments are usually lower than other forms of financing, your leasing dollar allows you to acquire more of the equipment your business needs or more advanced equipment. With an equipment lease, you get 100% financing so the amount of cash needed up-front is reduced. Most soft costs can be included: delivery charges, installation, training, and software to ensure that the equipment is productive immediately, speeding your return on investment.

Secret #2:

Bank loans can be dramatically more expensive than anticipated because of the large security deposit that is required. Down payments for bank loans will usually range between 20% and 40%. The result is that there is a tremendous difference between the effective APR and the stated APR. A stated 8% bank rate with a 25% down payment is actually equal to a 21% APR on a five year loan.

Secret #3

Even if you have the cash to purchase your equipment, purchasing is rarely, if ever, the best choice. With equipment leasing, cash can be used for other business requirements such as expanding sales, starting new marketing programs, offering quantity discounts, replenishing inventories, opening a new line of business, or increasing cash reserves. Using cash for necessary business expenses that cannot be financed is much more intelligent decision-making than spending it on equipment that is worth less and less as time goes by. Not only are there higher payments for traditional financing, but you’ll have to come up with the entire amount for a cash purchase or a substantial down payment with a bank loan if you decide not to lease.

Secret #4

With the lower, fixed-rate payments of an equipment lease, you’re protected against inflation. Cash outlays are deferred, as compared to an up-front purchase. In the future, “cheaper” dollars will be making your lease payments as inflation lessens your cost. You will be making your monthly payments to the leasing company with ever-inflating dollars during the term of the lease. This actually reduces the cost of financing to you in real dollars, a tremendous advantage that is often overlooked.

Secret #5:

Leasing equipment offers a wide range of benefits, from consistency with expenses to increased cash flow. But perhaps the most significant advantage of leasing is the ability to maintain up-to-date equipment. Leasing allows you to easily and affordably add equipment or upgrade to a completely new piece of machinery to meet future needs. This lets you transfer the risk of being caught with obsolete equipment to the leasing company.

Secret #6:

With the scheduled updating of your business equipment offered through equipment leasing, you can maintain a competitive edge, keeping you ahead of your competition. With an equipment lease, upgrading to newer technology during or after the lease is easy. In contrast, when equipment is purchased with cash or bank financing, there is an incentive to postpone any upgrade until the original investment has been recouped through depreciation, which hinders your flexibility. A planned replacement program avoids obsolescence and keeps you up to date with the latest state-of-the-art technology. An additional, often-overlooked disadvantage of ownership is equipment disposition. Ownership of equipment, the result of the full repayment of bank loans or cash purchases, includes several additional costs that are significant and can be avoided with leasing. These costs are associated with removal, environmental fees for disposal (for certain equipment categories, such as computers) and the costs of remarketing.

In summary, there are many “Secrets of Equipment Leasing” that require significant research to uncover. These “Secrets” can be determining factors in the survival and profitability of any business enterprise. As such, they warrant in-depth consideration to determine their potential contributions to every individual equipment acquisition situation. Nearly 100% of the time, bank loans and cash purchases are always significantly less beneficial and less advantageous than equipment leasing.