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Equipment leasing - information about how to use it for funding resources for your business

By: Amanda Paxman

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If you are in the market for equipment leasing then it will not be difficult to locate an appropriate leasing company. The marketplace for leasing is huge and since most assets can now be leased it is simply a case of locating a finance provider who works with equipment leasing. Most of the time the company selling the asset does not provide the finance themselves directly, they rely on a third party equipment leasing company. You will often get a referral from the company selling the asset to their preferred finance provider.

In common with all areas of commercial purchasing you should aim to get several quotations when selecting an equipment leasing company. The simple approach in the first instance is to get a quotation from the recommended finance company. The prices charged by the recommended finance provider should be close to market prices. Always be practical and recognise that you may not get the best quotation for your situation. Shop around and get multiple prices from other companies.

Asset finance is a broad term describing the various methods that are employed to fund the acquisition of assets for a business. In some scenarios the equipment is not actually legally owned by the business since the finance provider keeps ownership of the asset. The key point from the business owners perspective is that they have the use of the asset in return for frequent repayments. Normally what is significant to a business is that they can utilise an asset, regardless of whether they actually own it or not, to enable their business to operate efficiently and produce greater levels of profitability.

One form of equipment leasing is where a business signs up to an Operating Lease. In this case the equipment belongs to the finance company who effectively hires the equipment to the business over an agreed period (usually one to five years). At the end of the agreed term the finance company will either sell the asset in the second hand market or lease it again. This means that the lease payments can be kept low because the full asset value does not need to be recovered by the finance company during the first term. At the end of the lease term the asset is either returned to the finance company or a further lease agreement may be put in place.

A common form of asset finance is known as Contract Hire. This is another form of operating lease and is often adopted for acquiring vehicles. Most contract hire agreements include a number of potential service features like maintenance, replacement during repair, management, etc. When contract hire is used the finance company retains ownership the asset. The way in which the rental payments are decided is based on a residual value of the equipment after a predetermined timescale has concluded. This means that the cost calculations include a fee to recover the asset depreciation during the course of the hire timescale.

Article Source: http://depositarticles.com/

In common with all areas of commercial purchasing you should aim to get several quotations when selecting an equipment leasing company. The simple approach in the first instance is to get a quotation from the recommended finance company.

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