Regardless of the type of equipment you need in order to operate and grow your company, every business executive faces the same challenge...financing. How do you pay for these required overhead items?

Four primary financing options exist when acquiring a new capital asset-cash, loan, line of credit and leasing. Of all the ways to obtain equipment, leasing is the method most frequently used. According to the Equipment Leasing Association (ELA), eight out of 10 U.S. companies lease their equipment. These businesses, which range from start-ups to Fortune 500 companies, recognize that the real value of equipment comes from using it, not owning it.

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How does leasing work?

There are two ways you can acquire equipment through leasing:

1. You can select the equipment through a vendor or a manufacturer that offers leasing through its own subsidiary or a third-party financier.

2. You can select and order the equipment and then seek financing through a lessor.

ELA recommends businesses ask the following 10 questions before signing a lease. These questions take into account the before, during and after stages of a lease.

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Top 10 Questions You Should Ask Before Signing a Lease

Before
1. How am I planning to use this equipment in my business and how long will I need it?
2. Does the leasing representative understand my business and how this transaction helps me do business?

After
8. What are my options at the end of the lease?
9. What are the procedures I must follow if I choose to return the equipment?
10. Are there any extra costs at the end of the lease?

The Bottom Line

There are many means to achieving your business objectives, especially in the equipment financing market. As you evaluate what capital assets your business will acquire in the next 12-24 months, take the time to explore your options. With the right information, you gain the ability to assess the costs and benefits of various financing products, including leasing, and learn how to use this ever-growing option to add to your business financial performance. To learn more about leasing, visit the Equipment Leasing association's Web site at: elaonlin.com

*Lessor: The party to a lease agreement who has legal or tax title to the equipment, grants the lessee the right to use the equipment for the lease term and is entitled to the rentals.

**Lessee: The user of the equipment being leased.

Michael J. Fleming is the president of the Equipment Leasing Association of America (ELA). The Equipment Leasing Association of America (ELA) is a nonprofit organization headquartered in Arlington, Va., representing over 800 member companies, which provide a variety of asset-based financial products, primarily equipment leasing.

Author: Michael J. Fleming

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