Information about equipment leasing and financing for businesses that may be considering it as a financing option.

1. Understanding the
Basics of Equipment
Leasing
By John Elliott

2. Equipment leasing is a popular option for many businesses who
are looking to acquire equipment. Here are some basic
questions and answers to consider when considering equipment
leasing.
What an equipment lease is?
How does it work?
Who are the parties involved?
What equipment can be leased?
Why a business would consider equipment lease financing?

3. What is an Equipment Lease?
 Equipment Leasing is a financial product that allows businesses to acquire
equipment on a fixed payment plan versus paying the full equipment cost
upfront.
 A simple example of this is within the auto industry. When a customer is
interested in purchasing a car, rarely do they pay the full purchase price up
front. Instead, customers will use a finance option which allows them to pay
off the car on a monthly basis. This is similar to equipment leasing, but
instead of cars, equipment leasing deals with assets such as tractors,
construction equipment, trailers, landscape equipment, office equipment,
manufacturing equipment, and more …

4.  More formally, a lease is a usage agreement (rental) between an equipment
owner known as the lessor (Funder) and the user of that equipment, known as
the lessee (business entity). The lessee pays a periodic fee or rental payment,
usually monthly, to the lessor for the use of the equipment. At the end of the
agreed upon term, the lessee is responsible for executing a purchase option
to gain title and ownership of that equipment.
 Typical purchase options range from $1.00 to $750.00 OR are based off of a
percentage of the original equipment cost which is typically between 5% and
25%. The standard purchase options in small ticket leasing are $10.00 for a
standard capital lease and 10% for a stretch lease.

5.  Leases generally take the form of written contracts that range from 24 to 72
months and have specific terms & conditions laid out which detail the
obligations and duties of the lessee. Some of the terms & conditions of note
include the repayment term, responsibilities & restrictions, insurance
requirements, buy-out & early purchase option and, any additional fees &
charges that may be applicable.
 Pro Tip: Always be sure to read and understand your equipment lease contract in full and understand your obligations. Not all
equipment lease contracts are created equal. Understand specifically how your lease will terminate and what your
responsibilities are in terms of notifying the lessor.

6. Who are the Parties Involved?
 It is important to understand that the equipment leasing industry is made up
of two major parties that are customer facing: i) Funders; who work directly
with customers and, ii) Brokerage Firms; who syndicate transactions through
various lenders depending on the customers’ credit profile and rate needs.
 Both Funders and Brokerage Firms have particular advantages over one
another. To illustrate this, a Funder may be able to offer terms that are more
competitive than if a Brokerage were to syndicate the same transaction
through that Funder. However, a Brokerage could obtain better terms through
a different lending channel which has a greater appetite for that particular
transaction profile.

7.  Funders only have one source for their money to lend, themselves. This
means that they only have one credit box which governs their credit criteria
and so, places restrictions and limitations on customers they can approve. A
Brokerage has the ability to syndicate transactions to lenders who have an
appetite for “that” particular credit profile to get the transaction approved.
 Although both the Funder and Brokerage can be more competitive than the
other in different capacities, 9 times out of 10, the terms and rates will be
relatively aligned based on current market offerings. This allows the 7 out of
10 businesses that utilize equipment leasing as part of their strategic
planning, to place more emphasis on the actual equipment they are
considering and less on the leasing company they use.

8. What kind of Equipment can be leased?
 Most assets a business can use, can be leased.
 Typically, businesses are leasing equipment in order to expand, replace aging
equipment and/or meet the demands of new customers and contracts as well
as maintain their competitiveness and efficiency.

9. Most Commonly Leased Equipment:
 Agricultural Equipment
 Automotive Equipment
 Communication & Telephone Equipment
 Computer & Technology Equipment
 Fixtures & Racking
 Industrial & Manufacturing Equipment
 Landscape Equipment
 Machine Tools
 Material Handling Equipment
 Medical & Health Care Equipment
 Office Furniture & Equipment
 Printing Equipment
 Restaurant & Hospitality Equipment
 Software
 Trailers
 Transportation

10. Why would a business consider
equipment leasing?
 Many businesses look to equipment leasing as a viable means to acquiring the equipment they need
to operate because of the many benefits associated with the product.
Here are some of the main reasons why a business would consider lease financing:
 Easy and Quick Approval Process
 Low Monthly Payment Options
 Improves a Companies Cash Flow Position
 Pay for the Equipment as you Profit from its Use
 Preserves Capital
 Maintains a Companies Borrowing Power
 Overcomes Budgetary Limitations
 Limited Security & Disclosure
 Possible Tax Benefits
 Avoids Obsolesce of Equipment
 Simple Documentation Process

11. EquipmentWallet.com
 EquipmentWallet, an online equipment financing marketplace. The site
connects small businesses seeking the best equipment leasing options with
the equipment finance companies suited to their needs.
 With a user-friend design and technology assisted platform, EquipmentWallet
makes it simple for business owners to apply for equipment financing through
a bid-and-quote process.
 www.equipmentwallet.com

12. About the Author
 John Elliott is an industry expert in the equipment leasing field. Elliott has
worked for both private and bank-owned equipment leasing companies as
well as co-founded a private equipment leasing company, founded a
technology-based equipment leasing marketplace and digital media
publication. He has also been instrumental in developing other digital assets
such as dealer web application solutions in the equipment leasing industry.
www.leaseworld.org – topics and issues surrounding equipment leasing
www.equipmentwallet.com – equipment leasing options for small business