Making an informed decision
Industrial Distribution - May 1, 2004
By Phillip M. Perry
Contributing Editor
Deciding to expand your business is no easy task—and neither is finding the money to do it. Business owners must weigh the pros and cons of leasing vs. buying, and keep track of the shifting economic winds before making a capital investment. Here are some useful Web sites for keeping track of the cost of money:
- www.forecasts.org
Who knows what's going to happen to interest rates in the months ahead? While no one can predict the future, it's wise to track what the best minds—or the best computers—have to say about the subject. One of the most intriguing efforts is The Financial Forecast Center, a Web site sponsored by Market Research International, of Beaumont, Texas. This site offers six-month forecasts for the prime interest rate, treasury bills and other indicators.
To work its magic, this site employs a computerized system that analyzes over a dozen factors, such as unemployment rate, gross national product, index of industrial production, retail sales, non-residential and residential fixed investment, and manufacturing and trade activity.
- www.macro-dev.com
Here's a well-designed, fast-loading site from a financial firm called Macro-Dev, of London. This is a free site with interest-rate projections that reflect an international perspective. Also, check out the plainly written and extensive economic forecasts.
- www.leaseassistant.org
Lease Assistant bills itself as "the one-stop, educational portal for information on equipment financing and leasing." Topics include questions to ask when negotiating a lease, the differences between a lease and a loan, finding a leasing company, and case studies demonstrating the benefits of equipment leasing.
One of the most useful items is the search engine for leasing companies. To reach it, click on "Find a Leasing Partner." A search for leasing companies in New York state turned up 103 prospective providers in less than a minute.
Equipment Leasing Assn. (www.elaonline.com) is the host of Lease Assistant and as such is the group to which the leasing firms themselves belong. Some of the information here can provide insight into the changing posture of providers.
For more Information
The following books offer in-depth information on making capital investments:
- Determining Cost of Capital: The Key to Firm Value, Dr. Johnson Hazel, Financial Times Prentice Hall 1999. $34.95.
This book discusses how to make the right decisions about major capital investments by determining a company's cost of capital. Simply put, an investment in equipment is a good deal if it will return the cost of the capital required. This "hurdle rate" is the make-or-break factor in doing a deal.
- Cost of Capital Workbook, Shannon P. Pratt, John Wiley & Sons; Workbook edition. 2002. $35.
Correctly assessing the cost of capital is the challenge. Here's help in the form of a hands-on exercise book, as its title suggests. It offers an education in determining any company's cost of capital, using traditional methods such as discounted cash flow.
- The Complete Equipment-Leasing Handbook, Richard Contino, AMACOM, 2002. $75.
How should a lease be analyzed financially? The answer is in this extensive compendium of forms and analysis, which includes many examples of actual documents.
If you're looking to make a business loan or lease equipment, BuyerZone can quickly provide you with free quotes from multiple lenders.
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