Financing

Saturday, March 20, 2010

Understanding Equipment Lease Financing

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Equipment lease financing is any day a more feasible option than investing huge amount of funds in heavy machinery and equipment.

Trucks, Tractors, computers, fax machines and all types of equipment required for running an industry or business is available on lease. This concept helps to reduce the capital necessary to start a business.

Equipment lease financing requires the borrower to pay a specified amount every month to the manufacturer, dealer or lender whoever is the owner of the leased equipment.

Depending upon the nature of your business, you might be required to upgrade your equipment from time to time. This is especially important with computers and software.

Some lease agreements have a clause for such up gradation so there is no question of working with obsolete machinery for want of funds.

Moreover, the money spent on such lease can be treated as tax deductible business expenditure. A number of vendors and banks specialize in equipment lease financing. In fact obtaining an equipment lease is easier than getting a loan.

The mandatory checks on creditworthiness of the borrower etc are done but are more relaxed. A new business will find it easier to obtain a lease from a vendor than a bank.

Try to get a lengthy lease period if you are short of funds because the monthly rent will come down accordingly. An upfront payment is required which you need to check in advance to see if it can be reduced to some extent.

Is it possible to terminate the lease prematurely? Sometimes a pre closure fee will be taken from the borrower. There are also options like a cancellation clause which you can look into.

You can also try to purchase the equipment from the lender at the end of the lease term for a set price or at a fair market value.

You can try equipment lease financing when you are short on funds and would like to invest more on heavy equipments. Click here to know more about equipment leasing financing

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Labels: equipment financing, financing, lease financing