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Lease or Buy – Which Way for Office Equipment Procurement? (Page 1 of 2)
On the subject of how best to acquire office equipment and supplies, for the small to medium sized business enterprise the first step must always be to contact a financial adviser to discuss how best to make the acquisition. In this summary, however, I offer some pointers to outline possible routes to a cost-effctive acquisition. Outright purchase or leasing are broadly speaking, the usual choices, with hire-purchase schemes making a third route to explore.
Purchasing an asset is nearly always the most convenient method of acquisition. However, in some cases, especially for some high-end multifunctional office equipment purchases, purchasing may be seen as impossible because of lack of funds in the current finacial year, or in any case a high cost which discourages those all-important upgrades toward a more efficient, productive business.
However, many companies have found that Leasing becomes a favourable option, if necessary by funding from an agreed budget deficit against under spending in future years. Several options now exist where leasing can provide the best overall value for money.
To expand on this, some different ways of obtaining higher-cost equipment are outlined below. This is a brief summary only, designed to assist with conversations with suppliers or with internal finance departments.
Office Equipment Leasing vs. Hiring or Rental
The Equipment Leasing Association defines a lease as “A contract between lessor and lessee for hire of a specific asset selected from a manufacturer or vendor of such assets by lessee”. In this scenario, ownership stays with the lessor. The lessee has possession and use of the goods over a period on payment of the specified rentals.
This system is different from hiring (including rental and contract hire). Hiring requires the user to select from specialised stock already held by the hiring organisation which usually charges a fixed tariff. Leasing enables the user to select the goods from a manufacturer or other supplier of the required goods.
A lease is negotiated usually on terms specific to the deal, with the lessor. The lessor acquires the goods chosen by the lessee. Uniquely, this can allow the lessee to use the goods by making payments out of revenue. Office equipment (including photocopiers and fax machines) and furniture, cars and commercial vehicles, computers, machine tools, laboratory equipment and contractors’ plant are allcandidates for leasing.
Some Advantages of Leasing:
– All costs are fixed in advance, so budgeting is exact – Goods cannot be wihdrawn once the contract is signed (as long as agreed conditions are complied with. – Removes the need to tie up capital. – Allowances, depreciation and other calculations are not required – Leasing is simply about the rental cost. – Leasing releases capital which may not be available elsewhere. – Leasing is inflation-proof as payments are made out of future funds, in fixed money terms. Hence real costs fall against any inflation. – Possibility of immediate use of cost-saving equipment.
Identifying a Good Equipment Lease Business Partner (Page 1 of 2)
Every year, both big and small businesses are faced with the challenge of financing business equipment. Although applying for a loan from a bank or commercial lending companies is an option, getting approved can prove to be a major issue especially for new businesses. Fortunately, there is another option to acquire the needed equipment for business.
Search the market and you will find leasing companies that offer business equipment lease financing. The question is, how can you pick the right one of the many choices? Listed below are essential pointers that entrepreneurs must seriously consider to find a trust-worthy business equipment lease partner.
Not All Equipment Leasing Companies Are the Same
Not all leasing companies offer the same kinds of lease services. For instance, there are lease companies that exclusively cater to businesses in particular industries. Some lease providers offer specialized machines for specific businesses. You may also find lease companies that only offer vehicle leasing. Then there are leasing companies that are like a one-stop shop where you can acquire all types of business lease services.
When it comes to getting approval, the standards will also vary from one lessor to another. There are lease companies that have very strict standards while others may be more lenient in approving lease applications. In fact, you can find certain business lease companies that provide special lease programs for new businesses with no credit history and for businesses with bad credit history.
The amount of available financing will also be different depending on the leasing company. Some lease providers will offer lower financing (under $100,000) than others. If your business requires specialized equipment, these can be more expensive and youll need a higher lease ($100,000 and above) financing.
Prior to submitting your lease application, make sure that your chosen leasing company offer the exact type of financing you need. Does the lessor cater to businesses that belong to your industry? If you are a small business entrepreneur, does your prospective lessor serve to small-scale businesses? Most importantly, is there a lease program that matches your business?
Searching for the Right Business Equipment Lease Partner
In order to find the right business leasing company, a business owner must conduct some research. Try to gather recommendations from your personal and business contacts. For instance, you may ask your business attorney, suppliers, banks or friends in the industry if they know a leasing company that can help your financing needs.
From the list of prospective lease companies youve gathered, do further investigation by checking out the lease programs that each company provides. Check the requirements of application. Furthermore, check the lease companys credit rating requirement.
Doing research will be more convenient by using the internet. You can check out websites of major equipment leasing trade associations in your State and ask for a list of lease companies that offer services to your type of business.