Making the decision to lease equipment is an especially important one for small- and medium-sized businesses. With careful thought and financial planning ahead of time, equipment financing, and leasing options can easily become effective alternatives to a direct purchase.
Companies benefit from spreading the cost of a purchase across monthly installments while still taking advantage of the immediate access to the equipment for the length of the lease term. There are also tax-related advantages to consider, depending on how you approach your leasing options and tax planning. And, in many cases, businesses can elect to buy the heavy equipment at a reduced cost, either at the end of the lease or at predetermined points during it.
With all of the potential that equipment leasing brings to the table, it's important to make sure your business can make an informed and strongly positive decision about the equipment leasing company with which you'll build a partnership. Let's look at six key things you should know before you start getting in touch with equipment lessors.
Equipment leasing is a common business practice that allows companies to use equipment with very few restrictions and maintain physical possession of it. In return, the company, called the lessee, pays the owner of the equipment, called the lessor. The payments follow a mutually agreed-upon structure, which is usually a monthly schedule. No matter the type of equipment, these basic points generally apply.
There are two types of leases to consider as you search for the best fit for your business needs. At Cat Financial, we divide our lease options into:
Leases are a great way to get the equipment you need. However, top equipment leasing and financing companies have other options that might make more sense for the unique needs of your construction business. For example, Cat Financial also offers:
The method you use to pay for your equipment lease is secondary to core concerns like the monthly payment and important options like an early purchase agreement. However, payment is a crucial part of every lease. Your lessor should offer a simple and reliable method for making payments, allowing you to avoid having to engage in a manual process each month that could lead to costly errors if a payment is delayed or not routed to the right place. The availability or lack of such systems is a key indication of the type of customer service an equipment leasing company provides.
Cat Financial provides Direct Pay, a simple, secure and dependable direct debit authorization that pairs with your preferred business checking account. By withdrawing funds at the agreed-upon time each month, the entire process is automated. You just have to make sure the necessary funds are in your checking account.
As long as you uphold the terms of the lease agreement, your company maintains physical possession of your leased heavy equipment. That can mean your business will need to engage in both preventative maintenance and repairs. One of the most effective ways to keep heavy equipment in good working order is to utilize the maintenance and repair services offered by the same company that manufactured the machinery. Of course, there are many situations where you and your staff can likely complete the needed work yourselves.
An Equipment Protection Plan can ensure your assets are only worked on by qualified technicians, and provides a variety of protection levels that help address your specific operational and budgetary needs.
Direct lenders are a powerful alternative to the traditional structure of a lease or loan, where a business that wants to lease the equipment, the business providing the equipment and a separate financial institution are all involved. Besides making the entire concept of an equipment lease more simple and direct, it also allows the lessor to provide additional support and knowledge, along with a variety of optional considerations like equipment protection plans. Working with a direct lender means less red tape and more direct, fruitful discussions and agreements.
Did you know that businesses that are new or have less than perfect credit aren't automatically disqualified from enjoying an equipment lease? We've covered these important topics in-depth, along with a few other key considerations, in this article.
Understanding these six points helps you get that much closer to finding a great lease. Want to learn more about heavy equipment leasing options from Cat Financial? Get in touch with us today!