At face value, leasing equipment is not often an ‘absolute lowest cost’ solution. On secured loans, we simply do not beat the bank on posted annual percentage rates (APR%). Period.
Our equipment and vehicle leasing facilities are alternative funding services — and as such, offer some significant potential tax advantages, provide some diversity of funding for your business, and contain and fix operating costs of revenue generating assets over time. This means your savings happen based on your success and profitability through tax savings over the term of a lease contract.
So what does this suggest exactly?
If a bank wants your business, and your primary concern is to work with the absolute lowest nominal percentage rate possible, it will be hard for any non-bank owned leasing company to beat. A bank can provide you with the lowest overall cost of borrowing — though, as you may suspect, there are always trade-offs (in processing time, collateral security requirements, general security agreements, and personal guarantees).
That said, leasing equipment and vehicles for business is a sound alternative. While financing through a bank may lower your total cost of borrowing, in terms of cash management a bank loan or finance contract may actually require greater output of both upfront funds (down payment) and discipline (reports, and covenants to bank requirements) over the short to medium time horizon.
So, why is there a consistent appeal to look at a leasing solution?
Simple: C A S H F L O W. Total cost can be calculated in a few different ways. We often forget that there is a cost to having cash available as you need it: for operations, for re-investment, for liquidity, for flexibility. Without cash on hand, a business is cornered — restricted in options and mobility.
Lease structures generally require a lower initial upfront payment (down), can offer lower monthly payments (through deferred principal repayment) and often provide clear end-of-term purchase options (vs straight rental contracts). With our leasing solutions, we offer a way to improve and enhance the cash flow related to the fixed assets you require to make your company work.
The answers are not always easy. Mostly, “it depends”; on your situation, on the age, type and value of equipment, on credit history and the relative financial strength of your company. By all means let’s have the conversation. Please give me a call or drop a note to discuss your requirements.