If your small business who needs small business financing for a big piece of equipment, that can be a daunting proposition. You could lose out on revenue if you can’t get the equipment you need, but finding a five- or six-figure loan can be difficult these days.
That’s why equipment leasing can be a great solution. Leasing can have better tax advantages, as you may be able to write off your lease payments. Even better, a lease is considered an “off-balance-sheet” transaction, so the cost doesn’t negatively impact your financial statements.
When purchasing doesn’t pencil out
If you purchase equipment, any loan you take out instantly becomes a liability on your balance sheet. Not only that, but you usually can’t write off the entire monthly payment.
Getting an equipment loan normally requires a large down payment and better credit than you’d need to quality for a lease. By contrast, working with a specialty equipment lender, you can often finance equipment with little or no down payment. That preserves your capital.
It’s tough to find an lender for equipment leasing because they need to be set up to easily liquidate the equipment should you default on the loan. We know banks don’t like to own real estate — and that goes double for owning a backhoe. We’ve all seen the trouble banks have had liquidating homes that came back to them in foreclosure from bad mortgages. You can imagine what a problem it is for a bank to be stuck with heavy construction equipment it would have to store and sell.
Non-bank specialty equipment lenders, on the other hand, are set up to work with credit-challenged borrowers. If an equipment loan deal goes south, these lenders are experienced at liquidating construction equipment, and are able to redistribute or resell the equipment fairly easily.
The key is knowing equipment-leasing specialists and having the knowledge of how this industry works. If you know the right people at the right lenders, and know how to present a lease application, you improve your odds of getting your lease deal approved.
We have great relationships with established lenders specializing in equipment loans and leasing finance, including Dakota Financial, Variant Leasing, Team Funding Solutions and Blackstone Equipment Financing. It’s been personally gratifying to me to be able to work with these lenders and see small business owners grow their business, because we’ve been able to help them find a great equipment-lease or lending company and get their deal approved.