Equipment Financing and Leasing Methods

equipment financing

Whatever business you are in will require some kind of equipment financing. Your equipment will have to be either purchased outright or leased. Here at, you will find the equipment loans, whether it is for an office copier or a fleet of trucks.

Why Lease Instead of Purchase?

The main reason for leasing equipment rather than purchasing it is effective use of your business money. Leasing eliminates the need of having to spend too much on purchasing new equipment and/or vehicles.

If your business is not generating enough cash flow, leasing your equipment requires less money upfront. Leased business equipment can often be 100% financed with no down payment. This is a big help if you are just starting your business or cash flow is not where it should be. A leasing agreement may require one or two monthly payments upfront, which are applied to future payments.

Another reason for leasing equipment is the ability to acquire expensive items when your business cannot qualify for equipment debt financing. Leasing is an option for the following examples: You are a doctor with a private practice and you need an expensive piece of medical diagnostic equipment or you own an automotive repair shop that needs a computer-controlled wheel alignment machine.

Equipment leasing also provides built-in in protection against obsolesce of your equipment. This is an important feature when your company operations require a large number of computers or other equipment that is prone to rapid obsolescence. A leased piece of equipment can simply be exchanged when an updated model comes out. If you had financed the same equipment with a loan, you would have to purchase the newer version while trying to sell the older unit.

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Some Equipment Leasing Options

You have several general options if you chose to lease your equipment. Some of the more popular methods are: Fair Market Value, Dollar Buyout and Wrap Lease.

The Fair Market Value (True Lease)

Your funding source (financier) purchases the equipment. You then pay the financier a monthly payment until the end of the lease. At the end of the lease, you have several options. You can return the equipment, renew the lease or purchase the equipment for fair market value.

Dollar Buyout (Capital Lease)

This kind of lease guarantees that you will be able to purchase the piece of equipment for $1.00 at the end of the lease term.

Wrap Lease

If you have a current lease with a financier and you need more equipment financing, you can often do a Wrap Lease. This means that the original lease is "wrapped" into the new lease and your payments continue at the new amount.

What Is Sales-Leaseback?

Do you have equipment that you own free and clear? If so, you can use the equity in that equipment to raise capital for some other business purpose. This method of equipment financing is called Sales-Leaseback. You sell your equipment to a funding source. You then lease back your equipment on an agreed upon payment schedule. Now you have a lump sum of money to use as working capital or to expand your business. 

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Learn more about equipment refinancing and sales leaseback?

There May Be Times When You Would Rather Purchase or Refinance

You may also have equipment that you are currently paying on. You may be able to refinance this equipment to get a better term and interest rate or to raise capital for your business.

There may be times when it makes more economic sense for you to purchase equipment rather than lease or sell and leaseback. If you decide to purchase your equipment, you will need to obtain an equipment loan from a reputable lender.

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To learn more about equipment refinancing, click here.

To learn more about truck financing, click here.

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