Equipment lease financing: tips on buying:

Though the equipment leasing firms have provisions for several different types of equipment leases, but in the true essence there are only two basic types of the leases. These are:

Finance leases: these happen to be the most advantageous types of lease financing solution for equipment as the business can purchase the equipment after some time for a very nominal price. This is an ideal type of lease for those pieces of equipment which the business plans to takeover at the end of the agreement. The payment term is usually in accordance with the expected useful life of the equipment in question.

True leases: the term of this type of lease is not equated to the expected life of the equipment. The business can either walk away at the end of the term or can buy the piece of equipment at its fair market value. The payments that the business has to make are normally lower in this case because the leasing company retains the right to resell the equipment at the expiry of the lease agreement. This lease type also offers the opportunity for the business to write off the payments as per its convenience.

Payment options for lease financing:

Based upon the financial situation, the business can choose from a variety of payment plans to suit its requirements.

For instance a business with the seasonal revenue flow can choose the skip-lease option which allows it to skip out on payments during the months when the revenue flow is low without having to bother about penalties. And in case a business has low available funds but the need for the equipment is urgent it can go in for a setup lease which offers it the benefit of paying higher payments over time when the equipment start generating revenue. In a set up lease the payments start out as small and then gradually increase in size with time.

Up till now we were just giving you an idea about the different types of leases, but now we come back to the main theme of this article with is to serve as a buying guide. And in relation to this we will elaborate up on to major aspects, the first one being about choosing the right equipment financing company and the second one being the application for lease finance.

Choosing the right equipment financing company:

It is essential that the business begins with an evaluation of the prospective sources which can provide it with equipment financing solutions. It is important that the business equipment financing company has the ability to act like a business partner. The company should give you enough attention and answer all your questions that may come up from time to time. The company should have the right attitude to help you out through rough times and not just go on to repossessing the equipment or escalating their rates for you at the very first late payment.

Ideally the lease provider should have a long enough experience in the field of equipment leasing. There are companies with specialize in equipment leasing for particular industry only and there are others which provides leasing solutions for a wide range of industries. If there is the leasing company that specializes in your line of business, then he will be able to offer you are better deal and better services all through the lease agreement. A bit of research is required to find out if the potential Leasing firm has the expertise that is required by your business.

I reference check is indeed a must, and before making the final decision a reference checks should be made with the existing customers of the financing company. You can ask the equipment financing company to handing over the contact information of three to four references of businesses which are similar to your business size and your industry.

When making a reference check some of the points that you need to inquire about from the references are:

Whether the finance company treated them fairly

Were they able to get to the right type of lease as per their requirements

How helpful was the leasing company in terms of the application process and the paperwork

If they had any problems making the lease payments what was the type of reaction shown by the financing company

Are they willing to work with the same financing company again in future

Apart from going by what the references say you need to equate the terms and conditions offered by the financing company with your business requirements. Enquiry should be made with three to four different financing firms and only after a complete overall evaluation should you proceed any further. To get the right idea you will have to provide each of these lease financing firms with the following information:

The cost of the equipment,

The expected term length of the lease,

And your intention regarding the purchase of the equipment at the end of the term.

You can get as many quotes as you require, but remember to carry out a comparison only for the similar lease packages. One thing you must remember regarding the quotes is that though they are not hundred percent exact theyre still fairly accurate. And in the end the actual payments may go up or down depending on your credit situation.

The application process for equipment leasing:

Once you have decided on the financing firm which offers the best solution for your equipment leasing, it is time to fill out an application. The application should be filled in only when you are absolutely sure that you will certainly take the equipment lease from that particular financing firm.

These applications are treated along the same lines as credit applications and as each application features on your credit report, over examination can injure your future prospects. That is the reason we have emphasized that you should proceed with the application only when youre fully convinced with the leasing company.

Getting an equipment lease is somewhat tough as compared to traditional loans, because a huge number of financing companies dont consider applications coming in from businesses which have less than two years of experience while some other may be stingy about the minimum credits score.

Once the application has been submitted it is just a matter of two or three days that you will have a reply from the equipment financing company about whether they have accepted it or not.