Equipment Leasing

In simple terms an Equipment Leasing Broker is a match-maker. He or she matches the person needing to lease equipment with the company that will supply the capital for the lease. It sounds easy enough but a great deal of time and effort goes in to making the ideal introduction. Eight out of ten U.S. companies lease either some or all of their equipment and most of these companies went through a broker.

Your broker will look at your circumstances and provide you with capital financiers whose requirement and procedures are in harmony with your situation. You may be a start-up or a company that has been in business for some time that is short on cash-flow. Perhaps your credit rating is less than stellar. Your broker will know which lender is best for each instance.

There are two different leasing scenarios your broker will suggest:

Finance leases are an advantageous form of lease financing because it gives you the option to purchase equipment after a period of time for a nominal fee, usually one dollar. Equipment leasing brokers who offer these types of leases can help your business if you plan to keep the equipment after your agreement is up. The payment terms last for about as long as the expected useful life of the equipment.

True leases differ from other types of lease financing because they don't usually last for the expected life of the equipment. The equipment leasing broker gives you the option to walk away or buy it outright at fair market value. The payment terms of a true lease are typically lower since lessors can resell the equipment to another company when the terms of the agreement expire. Unlike finance leases, you can write off the payments on a true lease.

Lease financing payment options

Depending on your company's financial situation, equipment leasing brokers can provide lease financing that includes different payment plans to suit your needs.

For instance, if you own an agricultural business that relies on certain times of the year for a majority of revenue, a skip lease allows you to miss payments in slow months without penalty. If you have limited cash on hand and need the equipment to grow revenue, a step-up lease gives you the benefit of the doubt that you can make higher lease payments over time. Equipment leasing brokers begin your payment schedule with small payments that gradually increase over time.

Selecting the right equipment leasing broker

When choosing an equipment leasing broker, make sure you meet with several brokers and provide the following information:

• Cost: The total value of the lease
• Length: The number of months you must make payments towards the lease
• Purchase: Whether or not you plan to buy the equipment at the end of term.
• Credit score: Lessors will find out how strong your credit is and the size of your payment can increase or decrease depending on the score.

Once you select your equipment leasing broker, complete an application if you are positive you will use the recommended vendor. Since the applications show up on credit summaries, your credit report will show a new inquiry each time you submit an application. This could potentially harm your credit rating because the FICO score takes into account how many times you have inquired about new credit within a certain amount of time.