eLease Equipment Leasing

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a transaction for an entrepreneur today who had been using an old telephone system for over 2 years that was completed outdated.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.