Small Business Equipment Leasing
Small business equipment leasing options are available for just about any type of equipment with a value of at least $1,500.
Equipment leasing programs tend to be categorized according to time in business (start up, less than 2 years, greater than 2 years), amount of financing (up to $100,000 is small ticket, and over that is large ticket), and credit profile of the borrower.
For start up financing requests, there typically will be lending limits of anywhere from $25,000 to $50,000. Start up financing applications are largely assessed on personal factors of the borrower due to the lack of business history.
Even when companies are under two years in business, the credit assessment is still largely personal in nature for the smaller financing amounts. The only real difference compared with a start up application is that lease companies will tend to consider large amounts.
Once a company is more than two years in business, has two years of financial statements under its belt, and has had the chance to establish some business credit, an equipment financing application is more highly weighted toward business related factors.
Small business equipment leasing can be very specific in nature to the type of equipment as well as geography and credit history.
There are leasing companies that are also very broad based in terms of the types of assets they will cover, although they will also tend to have an asset rating system that will indicate the types of assets they prefer to finance versus ones that are considered to be more risky. The more risk associated with an asset type, the harder it typically will be to secure financing, and when financing is secured, the terms and conditions will likely be tighter. For instance, a sizable down payment could be required, or an additional guarantor, or higher interest rates and shorter lease terms may become part of the lease commitment offer.
Small business equipment leasing typically requires a personal guarantee from one or more individuals whereby the guarantor is expected to have solid credit and a net worth and/or annual cash flow capable of covering off the lease obligations in the event that the small business holding the lease does not make all its payments or honor all the terms and conditions of the lease.
Lease financing companies can also be very niche focused, only focusing on asset types that they know how to liquidate in the event of default. Sometimes these companies are vertically integrated with equipment liquidators so that they can more accurately assess the recovery value of an asset and to also allow them to participate in financing used equipment in their niche. One of the main requirements for this type of lender is the presence of a large and active resale market for the assets they focus on.
For small business equipment financing applications under $25,000, lease approvals can be received in a matter of hours with very limited application information required. As the amount of financing required goes up, so does the amount of information requested in the application and the time required to process and render an approval or decline (1 ot 3 days).
The large majority of equipment financing approvals do not require any down payments and can provide lease terms of 5 years or greater in some instances.
To understand how to take advantage of small business equipment leasing, contact an equipment leasing and financing specialist and get all your questions answered before signing up for any lease financing program.