Equipment Leasing

Some of the basic facts about leasing are as follows:

• Leasing is essential at every stage of development in just any business.

• In case of start-up businesses that have no revenues, smaller leases of approximately $100,000 or less can be easily managed. If the owners are willing to make monthly payments, the lease may be better managed on the personal credit of the owners.

• Equipment leasing is essentially a loan. At the end of the lease, the business can either purchase the equipment for its fair market value (or a fixed or predetermined amount) or continue leasing. It can also opt to return it or lease new equipment.

• Lease vs. Loan:-Unlike a bank loan or any other debt, a lease is not cancel able. A loan can be paid off by selling the equipment. Alternatively, it can also be refinanced. On the contrary, in case of a lease, the lease should be paid off in full. That is, all the payments must be done when one enters a lease. Moreover, lease payments are smaller than the loan payments.

• Leasing vs. Buying: - In case of buying, when a piece of equipment or vehicle is bought, the payment for it is supposed to be done in full either by using cash or by financing the balance. Once the payment is done, the buyer owns the equipment or the vehicle.

On the other hand, in case of equipment leasing, the equipment is bought and owned by the lender and then it is rented to a business at a monthly rate for certain number of months. In other words, with a lease, one has to pay merely for using the equipment as at the end of the lease, the lender ends up owing absolutely nothing.