Equipment Leasing Leverage
“Equipment Leasing Can Provide Tremendous Leverage To
For well established businesses that have great cash flow and excellent credit, the comparison between equipment leasing and other forms of equipment financing are very comparable in terms of rates, but not always that comparable with respect to terms.
With equipment leasing, a business with a strong financial and credit profile can be afforded arguably the highest form of available leverage available to them in the market for equipment financing transctions.
In most cases, strong applicants can get an equipment leasing facility for as little as one or two payments outlined in the lease repayment schedule, paid in advance.
And if there are related costs such as transportation, installation, and training, these costs can be added into the equipment lease as well, effectively providing equipment financing far in excess of 100% of the cost to acquire the asset in the first place.
For those with strong borrowing profiles, equipment leasing is something that should always be considered to conserve on available cash flow.
Equipment Leasing Leverage Can Be Advantageous
To Any Business
While the emphasis so far has been on how equipment leasing leverage is so advantageous to “A+” type credit profiles, the financing leverage is still going to be strong for businesses with less than perfect credit and cash flow as well.
With many small businesses where the financing requirements are under $250,000, equipment leasing still provides high levels of leverage to different credit and financial profiles, but at slightly higher rates.
For most small and medium sized businesses, equipment leasing is a tradeoff between rate on one side and leverage and speed on the other side.
The lowest cost forms of financing not only move slowly, but they also tend to be conservative when it comes to leverage where even the better credit risk applications are still required to have an investment in an equipment purchase of at least 25%.
The competitive strength of the equipment leasing model is “ready to go” financing at high levels of leverage in comparison to the bank alternatives.
And even though at times equipment leasing rates can be slightly higher than the effective rate on a comparable loan, the cost of capital does not do you any good if the additional time it takes to secure it causes you to either lose out on business opportunities or delay the ability to make sales.
If the time value of money is properly factored in from the outset, equipment leasing can still be considered lower cost even at slightly higher posted rates, provide that the leverage is strong and the transaction turnaround time is fast.