1. Equipment Financing for 21st
Century
“ Tools To Make A Cost Justification
For Acquiring New Equipment “

2. Common Perceptions of Error
• Focus on interest cost not opportunity cost.
• Leasing companies charge higher rates than
traditional banks
• Leases cannot be paid off early or rewritten

3. Profile of Typical Financer
• 2 to 5 years time in business
• Growing faster than cash available
• Under $ 2 million in annual sales
• Less than 10 employees
• Prefers to minimize after tax profit
• Intensive / continous equipment needs
• Good personal credit – pays their bills

4. 10 Common Myths
• Cash doesn’t cost a cent – Opportunity cost
• Lease companies don’t like to finance used
equipment, auctions or private party sales
• Established businesses don’t lease their
equipment ( tax savings over convenience)
• Credit cards offer lower rates than leasing
• New businesses lease more often than
established

5. Equipment Lease History
• 2010 BC - City of Ur leased agriculture
tools to land owners
• 1700’s - United States - Liverymen leased
• horses, buggies , & wagons
• 1870’s - Railroad cars & barges
• 1954 - Modern Leasing - US Leasing Corp

6. Lease Classification
• Large Ticket Leasing - $ 500,000 +
• Mid Ticket Leasing - $ 100,000- 500,000
• Small Ticket Leasing - $ 2000-100,000
• --- Application only , typically no financial
• statements , what we’ll be discussing

7. History/ Statistics
• 1960’s - Xerox , IBM popularize leasing
• 2002- $ 240 Billion Leased
• 80% of Small Businesses Lease Equipment
• 35% of All Equipment Lease Financed

8. 10 Common Reasons to Lease
• Preserve Cash Flow & Working Capital
• Convenience
• Tax Savings
• Fixed Monthly Payment
• Easy to Budget for Future Equipment Need
• Flexible Financing ( ie Seasonal Payments)

9. Ten Common Reasons to Lease
• Convenience – fast response to immediate
opportunities
• Preserve Cash Flow
• Keep Bank Lines Of Credit Available
• Consistent budgeting
• 110 % Financing – Shipping / Install
• Tax Writeoffs
• Flexible Financing – Deferred/Skip/Seasonal
• Immediate ROI / Profitability

10. Type of Leases Available
• Finance $1 buyout- Conditional Sale
• True/Operating Leases- 10% / FMV
• Operating Leases
• Equipment Finance Agreements

11. Steps to Favorable Terms
• Keep personal credit score high
• * no slow payments ( revolv/install)
• * low revolving debt - credit card debt
• ( consolidate into home equity line)
• * reveal any issues ( ie divorce, identity theft)
• * Establish installment loans early on
• Update your D&B Report regularly – report
suppliers
• Provide bank statements
• Reveal any comp credit borrowing

12. Getting Terms for New
Businesses
• Share Business Background/Experience :
• Cost Justify ROI > monthly lease payment
• Show Additional Sources Of Income
• Always offer spouse as guarantor
• Provide all owners as pg’s – even silent
ones
• Share comp credit - other leases or loans.

13. Conclusion
• You need to decide for yourself if leasing is
right for you .
• Determine long term equipment needs
• Don’t always believe your business
associates, banker, or friends.
• Use lease payments as cost justification
• to evaluate equipment purchase.

14. Resources Available
•Equipment Lease Association : http://www.chooseleasing.org/
http://www.chooseleasing.org/informed/Articles/SmallBusiness.pdf
Free credit report - https://www.annualcreditreport.com/cra/index.