1 0 keys to financing equipment

By Kenneth E. llentsen, Jr, Equipment Leasing & Finance Association

equipment lcase financing, in particular. Some types of leases allorv for seasonal business fluctuations. lorver monthly payments rvhile a project is ramping up and revenuc not yet being generated from the equiprnent. and other specific circumstetnces your business nray cxperience.

5 Up-to-Date Technology.

Thc ability to have the latest equipment is important in today's busincss envinlnment. Many businesses canllot afford to buy outright the equipment they need to be cornpetitivc and thrive.

B1 tunding equipment ncqtr isitittrrs through term financing. they iire oftell ablc to acquire mttre and better equipment that may have been out of their reach if they only cttnsidercd acquiring it through a cash purchasc.

O Equipment Experts.

A StlE from internally generated la.cash florv or credit lines, businesses interested in acquiring ecluiprnent require other choices for flnancing their capital spending. There are several things to consider in searcl'ring for the financing oPtion that best matches your needs. including practicality, cost-cffectiveness, type ar.rd use of equipmcnt. cash flow. and longterm capital and credit demands.

Horv can you deterrnine rvhich is bcst for your comPanY? Factors ttl keep in mind include knorving thc length of timc for rvhich the equipme n t is needcd. you r ta x s it u itt iolt. cash florv, ancl your company's future capitail needs related to future growth.

Some clf the bcnefits of financing equipment include: lnvesting in large capital cxpenditures rcpresents big financial risk, especially fbr srnall companies. al

1 Flexible Financial Solutions.

The types of financing sttlutions equipment finance companies offerespecially leases are flexiblc and can be tlilorcd to spccil'ic accounting. tax or cash flor'v nceds. They run thc gamut fr"om fair-n.rarket valuc (FMV) lease transactions and capped FMV leases to full payout loans.

Z Capital Preservation.

Preservation of capital is a ctlnsideration that ()l'ten makcs equipmcrtt financing an attractive oPtion.

Financing vs. spending cash. and particularly thc type of financing employed (leasc vs. loan), can helP mitigate the unccrtainty of investing in a capital asset that may not yield the desired return or increase efficiency. cost savings, or future sales. For instancc. lease payments can ofien be matched to the productivity the cquipmcnt produces.

5 Improved L,xpense Planning.

Mirintaining cash flow ttttd consistent budgctin-e is anothcr consideration in equipment financing. Instead of considerable capital outlays resulting in huge budgct f'luctuatior.rs. financing cnables even expense planning.

Tax considerations also come into play. Full payout leases or equipment loans allow thc borrorver to take depreciation on the asset acquired. rvhile an operatin-e or fair market value lease allor,vs the borrorver tcr takc loner pa)mcnt\ but ncl dcpreciation. A loan allorvs you to lock in your payments firr the expected lif'e of the asset. rvhile a leasc provides ltlwer expense fbr the expccted time of use.

4 B.rsir,"rs Cycle Flexibility.

Flexibility is tnolhcr key aspect ttf

Somc linirncc ctlrnpanies are equipment experts and oller cquipment specialties that other sources of finance dcl not. Equipment finance experts have special relationships ivith Inanufacturers and distributors. ManY cquipment financiers specialize in ccrtain equipment types or industry categury, such as IT. manufacturing or any other equipment.

7 ManagedObsolescence.

The risk of orvning obsolete equipment (such as IT equipment) is eliminated if you use lease financing fbr your acquisition. since many agreements allow fbr easy and fast equipment updates.

Additionally, most equiPment finance companies, in partnership rvith their vendors. rvill rvork rvith the customer to "right size" the equipment, by strucluring eo-terminu\ tr{insactions or facilitating trade-ups to cnsure the cust()mer has the aPProPri:rte equiprnent. Further, most financiers handle the disposal and other ownership burdens of equipment rvhen it is time to upgradc.

8

Dependable Asset Management.

Asset manugemenl ensure: equipment isn't under-utilized or over-utilized. Knorving rvhere your equipment is being used. how much, and r'vhen it is tirne to upgrade, Llpdate or dispose is an important service that manY finarrcing companies offer. A good :l\sct Inanilgement pfoq1111-' trltcks equipment throughout its life cycle.

9 Equipment Disposal.

Equipment disposal is another issue lPltrttt Ittttt ltt l'd.\e 11 l