eLease Equipment Leasing

When many business owners lease for the first time it changes forever the way they look at equipment, budgets and financing. It is simple to spot a potential leasing fanatic. All it takes it a passionate entrepreneur and a business model with growth potential.

Here is how it works: a business owner has a goal they are focused on achieving. Most good business owners make detailed budgets and plans to achieve their goals. Experienced business owners have learned to tie their expectations to their timelines and budgets; they realize that growth usually takes longer then expected.

Leasing frees your business from constraining equipment budgets. It speeds up your growth cycle significantly. The transition from leasing customer to leasing fanatic occurs once the business model is proven and the company has enhanced profits directly resulting from the equipment they leased. The first month that a business owner sees on their books how much more they are making with their new equipment in proportion to how much money they are spending on their equipment is when they fully appreciate the value of leasing.

If it worked once well, lets try it again. Many businesses just need equipment to grow. By leasing equipment they can dramatically increase what they can acquire in short period of time. With one lease under their belt business, owners come back to elease.com to finance additional equipment to continue their growth.

Networking equipment leasing is a good example of an industry that can create some leasing fanatics. For example, if you are an ISP (Internet Service Provider) you need computers to sell web site space to your clients. Presumably your clients are paying you monthly for your service so you can apply those monthly payments directly to a lease payment for a new machine and rapidly expand your business.

eLease has countless business with dozens of leases with us and they are always looking for more. It is one of the most satisfying parts of my job to see a company realizing the benefits of leasing to grow their dreams.

Sometimes examples help illustrate abstract concepts like leasing. We are working with a film production company that has about 4 years in business and is trying to expand. The economics of their business provides a clear example of how leasing can help any business grow.

In the video production industry equipment doesn’t come cheap. Professional cameras range from tens of thousand of dollars to hundreds of thousands of dollars and with each piece of equipment there are necessary accessories which always end up costing thousands of dollars. And that is just the beginning. You need professional monitors, decks, expensive editing software and lighting packages.

This particular client has several projects happening at the same time and they wanted to increase their productivity by expanding their editing capabilities. They didn’t have enough capital to purchase the editing equipment required and were at a standstill.

When I ran the numbers for the client it made their decision easy. The equipment cost about 10,000 and it would take them months, if not years, to have enough money to purchase the equipment with revenues from the business. Their clients usually pay 60 days after the work is completed and they had a limited amount of work they could do given their existing infrastructure.

These clients bill their customers about $750 a day for editing and were not able to bill more because they only had one editing system to work on. You can lease $10,000 of equipment for as low as 225 dollars a month, far less than one day of editing. The numbers made their decision easy. By leasing the editing equipment they can spend less than half a day a month paying for their system and the rest of the month is profit to the company. The question for the business owner was clear: will you have use for the editing system for more than one day a month moving forward. The answer was naturally yes and leasing the editing system allowed them to remove a bottleneck of their production line and expand their business exponentially.

People occasionally ask if eLease.com can finance software and the answer is yes. As long as the software is coming from a manufacturer we can verify and the software is critical to your business.   eLease works with over 100 software firms to provide leasing services to their customers.

It is hard for a lot of business owners to wrap their minds around the concept of leasing software since it is not a physical piece of equipment. For leasing companies, software is riskier investment because there is nothing to resell if a company is unable to make its payments.

Every year CFOs find a larger and larger portion of their budget being allocated for software. It is an integral part of doing business these days and can be quite costly. Leasing or financing software is worth considering because it allows businesses to get the full versions of certain programs they would otherwise not be able afford. eLease.com can also finance the support and annual contracts to sweeten the deal.   With products like Great Plains software eLease.com is able to finance specific modules with just a one-page addendum.

For example, eLease.com just funded a lease for a web services company for $30,000 of Foundry Network equipment. This particular company has been in business for 4 years and wanted to structure their financing for 24 months with a Fair Market Value Option buyout.  We were able to get the software funded in just 2 days. This is the 12 lease we have funded for this customer who continues to grow and use leasing and financing to build their business.

Why do I like the small lease for the small business?   Today’s economy is all about impressive big numbers. Everywhere you turn there is always someone throwing around a big number. What I think some people forget is that a lot of smaller #’s create those bigger numbers.

We funded a transaction for an entrepreneur today who had been using an old telephone system for over 2 years that was completed outdated. Like most business owners, he was concerned about cash flow. We financed his $3,595.00 system the same day with payment of $126.00 per month on our Equipment Finance Agreement program.

The business was very small but had big plans and I like to think we are part of his future success.

The Definition of the Equipment Finance Agreement

An EFA is a fixed-term obligation with equal monthly payments, where the borrower is the owner of the equipment and the lender has a security interest in the equipment. The borrower deducts as a business expense both the depreciation on the equipment and the interest portion of the monthly payment.    A lessor may use an EFA, and act as the lender, when the borrower has already taken delivery of, and has paid for, the equipment.

We started offering EFAs in 2005 and we have had tremendous success with them over the last 2 years. I consider the EFA as a $1.00 lease on steroids because it is giving you the same tax benefits as a normal lease but has more flexibly to pay it off early. When we finance equipment for our office we use this type of financing.

Let us know if you have any questions on this type of agreement.

Every company needs a limousine right? Well, maybe not every company but a country club that is trying to become a destination nightclub certainly does. In general, a great time to lease is when you are a successful business that has hit an earnings plateau requiring major capital expenditures to move in new markets. If your company has a steady flow of business coming in you don’t want to burden that thriving part of your company with huge equipment costs for an untested venture. By leasing equipment rather than purchasing it you can insure your existing business is not disrupted by expansion. In other words, leasing lowers your risk and increases your chance of success.

I was excited to help this business grow but when I processed their equipment leasing application I ran into a common problem: exposure. Not the exposure that you are thinking about, leasing exposure.

What is exposure and how can in impact my business?

All leasing companies set a limit on the amount of money they will loan a particular company based on financial criteria that is often referred to as exposure. Once this limit is established is easy to add equipment onto existing leases or start new leases as long as the “total exposure” is still under the set limit.

The country club was in good financial standing. In fact, eLease had already funded a lease a few months earlier for their new management software. While the new lease request for the limousine was less than the original lease for management software the “total exposure” of both the management software and the limousine was higher than the limit that eLease had set for the company.

Computer based scoring systems that run most leasing companies would have declined the country club instantly for having, “too much exposure.” This highlights two important things to know about leasing. First, work with a leasing company that has a real person looking at every deal. Secondly, find a salesperson that has some equipment leasing experience so they know how to work around some of the common leasing hang-ups.

I was able to prove that the country club had already grown from the time eLease had financed their management software and was continuing to expand. This growth dictated a revaluating the “exposure” limit. When the companies “exposure” limit was adjusted it was increased by enough to lease the limousine. The deal got done, the company is doing well in their new endeavor; all part of a days work.

Used equipment is an excellent way to take advantage of leasing or financing. We recently financed a used 2000 Peterbilt truck for a customer that is a great example of how to make the most out of limited capital.

To begin with, the used truck cost 40% less than a new truck. That is a big savings, even before they calculated how much less they would have to pay upfront by breaking up the payments over a couple of years. We were also able to finance the additional 200,000-mile warranty for the truck. This gave the customer the piece of mind that if anything went wrong with the truck it would be covered in their monthly payment.

There are a couple of things to remember when choosing a piece of used equipment. First make sure the equipment is in good working condition. A lot of companies will lease a piece of used equipment that is exactly like equipment they already own. Smart move.  That way they already know how to operate the equipment and will have a maintenance plan in place to keep the equipment in good working order.

When ever possible get a warrantee. If a warrantee is not offered, which is usually the case with used equipment, take the time to get the equipment looked at by a trained professional to make sure there are no hidden problems an untrained couldn’t see. Particularly when you are leasing the equipment, it is worth the minimal extra cost to ensure you have a good piece of equipment that will last the term of the lease.

eLease is able to finance all kinds of used equipment and recently we expanded our offerings to allow used equipment to be leased regardless of the age of the equipment.  eLease most frequently leases titled vehicles, furniture and fixtures, printing equipment, metal working equipment and others.