Pointers to Equipment Leasing Loans for Businesses

When you are a business owner and require some expensive equipments in order to run your business you constantly evaluate whether to purchase them or lease them. If you need some expensive equipment’s or technology, but the price is high and you cannot afford it, then equipment leasing loans can be of immense benefits. A lease means making smaller payments every month until the end of the lease period comes. At the end of the lease tenure you have the choice of either returning the equipment or buying it at a reduced price.

Equipment Leasing Loans

Comparison between Equipment Leasing and other Equipment Loans

An equipment leasing loan allows you to buy and own the equipment, while you pay back the loan amount gradually. It just divides the price of the equipment into monthly payments along with the interest. You can even pay the amount back earlier and lessen the amount of interest you must pay.

Equipment leasing on the other hand is an agreement to rent the equipment and you don’t own it. You do need to pay the price and the interest and then you choose either keep it or return to the lessor.

Types of Equipment Leasing Loans

Equipment leasing loans can be categorized the following listed types:

1) Finance Lease: This is also known as a conditional sale or capital lease. Here you pay the full price of the equipment and any charges outstanding at the end of the lease period. You are given several options to buy the equipment which are as follows:

• Fixed Price: You can buy it at a fixed percentage of the original price.
• Fair Market Price: A separate appraiser determines the market value of the equipment, which is what you must pay.
• One Dollar Option: You just pay one dollar at the end of the term, because you have already made the lease payments comprising the price and finance charges.
• Prepaid: You pay the market price at the onset of the lease period.

2) True Lease: This equipment leasing loans does not require you to pay the entire price and finance charges at the end of the tenure. It is also known as an operating lease and in this case you are not purchasing the equipment.

Eligibility Criteria for Equipment Leasing Loans

Five factors primarily decide if your application for equipment leasing loans is going to be approved or not:

• Your business background.
• Your credit rating.
• The type and size of the lease.
• The length of the lease term.
• The sustainable value of the equipment.

Equipment Leasing Loans

Step by Step Guide to Equipment Leasing loans:

When you apply for equipment leasing loans, here are the steps you typically need to follow:

1. You first fill up an application form. You will need to provide financial details of your business during or after the application.
2. The lessor evaluates your application and informs you about the status of your application.
3. After receiving an approval, you need to review and confirm whether you are okay with the structure of the lease. The contract is hence signed.
4. After the lessor receives the signed contract and payment, he or she notifies you that the lease has started and you can get the equipment for your business.
5. The money is either given directly to you or to the equipment manufacturer.

Deciding which type of equipment leasing loan is suitable for you and your business is a tricky decision indeed. Carefully analyze your priorities and your ability to make the monthly payments, before you settle on any type of equipment leasing option.