info@noreastcapital.com 410-268-5588

What Is a Typical Interest Rate on Equipment Leasing?

More and more companies are choosing to lease some or all of their equipment to reduce their initial setup costs, expand faster, remain more flexible, and gain access to tools faster. But a lease isn’t free, and you’ll have to pay interest each month. The typical annual interest rate offered by equipment leasing companies might be between 7 and 13%, but it depends on various factors.

The best way to get started is to speak to a leasing expert and ask them about the kinds of loans you can get. If your company is in good shape and has been in operation for several years, it’s likely that you will get a great deal. However, even newer businesses can benefit from leasing, especially if they need a lot of expensive equipment and don’t want to spend too much time crowdfunding or applying for loans.

What Is a Typical Interest Rate on Equipment Leasing?

Interest rates for equipment leasing vary greatly, and it all depends on your individual situation and the kind of leasing company you select. For loans under $100,000, you can expect a rate of 7-9% if you have excellent credit and go with a reputable lender. However, smaller and less competitive offers might be between 9-20%. You can expect an interest rate of over 10% if you have bad credit or you’re a very new company.

Larger loans are usually cheaper, and you can expect a rate of 6-8%. However, these are only issued to companies that have already proven that they are profitable and reputable. If you’re setting up a startup, you should begin with a smaller lease and always pay on time. That way, you can show the lender that you are dependable, and you will soon gain access to better interest rates.

Factors Affecting Your Rate 

It’s hard to estimate your interest rate without speaking to you in person because so many factors affect the price of your lease. For example, there are various kinds of leases, and some are more expensive than others. What’s more, the duration of your contract makes a difference, since some lenders prefer longer-term leases over shorter ones.

Your leasing company will also need to consider your individual situation and the health of your firm, and they will take into account what kind of equipment you are borrowing. If the tools are prone to breaking or they are very specialized, you might have to pay more than if you’re borrowing standard equipment like office furniture and general electronics.

The Length of the Lease 

Here at Noreast Capital, we typically offer leases of between 12 and 60 months, with the most popular term being 36 months. We often offer better rates on long-term leases, especially if the piece of equipment we are lending is likely to depreciate or become outdated over time.

The Type of Equipment Borrowed 

Not all pieces of equipment are the same, and you will need to consider what you are borrowing. Office equipment leasing can be easier. For example, some standard items like furniture are easy to lend and can be purchased by leasing companies in great quantities. What’s more, such items don’t generally require expensive maintenance and repairs, so they don’t cost the company very much.

On the other hand, some specialized pieces of equipment might only be purchased by very specific types of companies, so it’s harder for equipment leasing companies to lend them to someone else once they’ve been returned. What’s more, lessors often take over the maintenance costs, so this has to be factored into the equation. If you’re borrowing something unique to your industry, you should speak to your account manager about the interest rate.

The Type of Lease 

There are many types of leases, and not all of them will be equally expensive. Businesses that know they want to purchase the equipment once their lease ends can select a capital lease, which allows them to buy the tools for $1. This is a standard contract, so it isn’t expensive to set up. Because you’re paying the same amount each month, the leasing company’s risk isn’t very high, and you won’t have to pay a very high interest rate.

On the other hand, there are some specialized contracts that might require you to pay more. For example, new companies can delay payments for several months as they start to build up their customer base. Similarly, seasonal businesses can pay more during the busy months and less during the quiet months. In some cases, these leases will be more expensive because the lender is taking on more risk.

Your Company’s Age 

Most leasing companies prefer to work with businesses that have been in operation for at least two years. That way, there are financial statements and bank references available, and the profitability of the firm can be evaluated more easily. A company that has been running for many years is more likely to get a low interest rate because there is very little risk associated with lending to them.

On the other hand, a startup is much riskier because most new businesses fail within the first five years. If the company goes bankrupt, the lessor might not receive their money. For this reason, newer businesses have to pay a higher interest rate, and they might also have to provide additional documentation and a personal guarantee from the CEO.

Your Company’s Financial Situation and Reputation 

As mentioned, your financial documentation will be reviewed before we can offer you a lease. That way, we can estimate whether your company is profitable and how much money you can comfortably pay back each month. If you are in great financial shape and you’ve never had any problems with other lenders, it’s likely that we can offer you an excellent interest rate and a large amount of credit.

You’ll have to pay more if you’ve failed to pay other lenders or if there is no evidence that your company is profitable. In such a case, we might start with a small and relatively expensive lease. Over time, you can prove to us that you are a reliable borrower, and we will decrease your interest rate and increase the amount you can borrow.

Why Choose Equipment Leasing Companies? 

Although you can get excellent interest rates, equipment leasing is still more expensive than buying items outright. So, why do so many companies choose this method, and is it worth it? The answer is that leasing can reduce your initial expenses and allow you to invest your money into other aspects of your company.

If you’re a new company, you’ll be able to access the tools you need right away, without having to wait for several months or years. What’s more, you will benefit from increased flexibility because you can give back equipment you no longer need.

Reduced Expenses 

The primary benefit of an equipment lease is that it allows companies to keep their capital. If you borrow some of the items you need, you’ll have money left over to focus on other aspects of your business, such as renting an additional office or shop space, hiring more employees, or developing another product or service that can further increase your company’s income.

Leasing also allows you to plan your expenses more easily. Instead of having to spend all your money upfront, you can spread out the payments and lock in a fixed monthly price for your equipment. That way, your finance team will be able to give you a more accurate picture of your company’s financial health, since there won’t be any unexpected expenses.

Increased Flexibility

At the moment, market conditions are changing rapidly. A piece of equipment that was essential two years ago might not be needed anymore today, and customers who loved one product might switch to another one within a few months. To make sure you’re not left behind, you need to be as flexible as possible. Leasing allows you to pivot faster, since you can simply return or exchange equipment you no longer need once your term is up.

Quick Access to Equipment 

New companies often struggle to access the equipment they require. They might have to spend a lot of time crowdfunding or pitching their idea to investors. By applying for a lease, you can reduce your initial expenses and gain access to equipment even if you don’t have a solid customer base yet. This allows you to start or expand your company faster which is an advantages of leasing.

Equipment leasing companies offer great interest rates to businesses of all sizes and industries. While 7-13% per year is standard, your rate will depend on the kind of lease you’re getting, the equipment you need, your company’s age, and your current financial situation. Call us now at Noreast Capital to find out more about getting a lease from us. We will pair you up with an account manager, who can process your application and help you find what you need.

How to Lease Equipment

No matter the industry, most businesses need a significant amount of equipment. While it can sometimes make sense to purchase this directly from the manufacturer, leasing can be a great alternative because it conserves capital and allows for more flexibility. It is estimated that over 80% of businesses in various sectors lease equipment.

Fortunately, it is extremely easy to get started. Once you know what items you need and how much they might cost, you can compile all the relevant documents and contact a reputable leasing company. They will make you an offer and ask you to pay a deposit. As soon as you’ve done this, you can take your new equipment to your business location and use it. Today, let’s have a closer look at how leasing works and whether it could be a good idea for you.

How to Lease Equipment

When you get a loan, ownership of the equipment transfers to you. At the end of the loan term, the item is yours to keep. During the lease, the equipment belongs to the lender and you pay a monthly fee to use it.

Once the term comes to an end, most lessors allow you to decide whether you would like to keep your item, give it back, or renew the lease. This is very useful because it allows businesses to operate more flexibly. What’s more, it’s easy to get started, and any business that has been operating for a while and is in good financial shape is eligible for a lease.

Take Stock of What You Need

First, you should take inventory of any items you already have and figure out what else you have to buy. Good leasing companies offer a wide variety of products, so you can lease almost everything you need. For instance, we at Noreast Capital can provide you with office furniture, electronic devices, kitchen equipment, tools related to security, machinery used in construction, and even various types of software.

Together with your team, you should decide which items you’ll need for a long time and which ones you might like to replace every few years. Often, the former can be purchased outright, and the latter can be leased.

Compile the Relevant Documents

Depending on the financial stability of your company and the size of the loan you are requesting, you’ll need to provide certain kinds of documents to your leasing company. If you’ve been in business for more than two years, you will have to show some of your bank, trade, or other financing references. Those requesting large loans should also provide financial statements.

If you’re a brand-new company or you haven’t been operating for more than two years, a personal guarantee might be necessary, but as long as the owner or director is in a good financial position, a lease should still be possible. In some cases, startups will also have to show pro forma financial statements, business plans, and supplier contracts.

Contact a Leasing Company

Once you’ve come up with a list of items you need and compiled all the relevant documents, it’s time to lease equipment from a reputable company. Here at Noreast Capital, every new business is paired up with an account manager, and you can contact this person whenever you have questions or a request.

The manager will speak to you about your business’s background, current operations, and future plans. Then, they can show you what equipment we offer, and you can choose the items that best suit your needs.

Pay Your Deposit

There are various types of leases, and your manager can explain the differences and let you know what each one will cost. For example, the idea behind a capital lease is that you own the equipment at the end, whereas a true lease might offer you more flexibility and allow you to return the items at the end.

When you’ve found a suitable arrangement, you will be asked to pay the deposit. Then, you can take possession of the equipment and begin using it at your business location. The whole leasing process might only take a few hours, especially if you are requesting items that cost less than $50,000. Larger leases require more thorough financial checks, so you might have to wait for two days until we get back to you.

Decide What to Do with the Equipment at the End

Most leases are 12-60 months long, with the most popular term being 36 months. At the end, businesses can decide what they would like to do with the equipment. In some cases, they buy it from the leasing company and continue to use it. However, this often isn’t the best solution, since technology might have improved in the years since the lease was signed.

If this is the case, company owners might decide to give back the old item and choose a more updated version, then sign a new lease. If the nature of the business has changed, the equipment might no longer be necessary, or the owners might want to select something different to meet their needs. As you can see, leasing is very flexible, and it allows businesses to scale their operations or pivot and target a new market at will.

What Are the Advantages of Leasing?

There are many reasons why so many firms choose to lease instead of buy. The primary one is that they can avoid making an upfront investment and therefore keep more of their capital. Additionally, leases offer more flexibility, and there is a suitable option available for almost every business which are advantages of leasing. Unless a company is struggling financially, they are likely to be eligible for a lease.

No Upfront Investment

When you’re just starting out, you might not have enough money to purchase all the equipment you need. In such a case, a lease can be a great way to reduce the financial burden and make your startup more feasible. Instead of having to worry about raising money to purchase your items, you can focus on improving the efficiency of your operations straight away.

Successful larger companies can also benefit from leasing because it allows them to keep a larger percentage of their profits and reinvest them into growing their business. As a result, they might be able to open up another branch or expand into different areas of the country.

Various Options to Suit Companies’ Needs

Every company that wants to lease equipment is different, so lenders have developed a number of options. For example, businesses that operate seasonally can pay more during their busy months and less during quiet times. Similarly, startups that don’t have a large customer base yet can delay payments for a few months or pay less at the beginning and more as they grow.

If you run a special type of business or you have a unique request, don’t hesitate to speak to your account manager. They will be able to put together a customized lease that suits you.

More Flexibility

Leases offer an enormous amount of flexibility. When business owners sign a contract with Noreast Capital, they often don’t know whether they will give back their equipment at the end of their term, sign another lease with us, or purchase the items outright. Depending on market conditions and the direction the business goes in, the CEOs can choose the best option once the lease is up.

Most People Qualify

When offering you a lease, the lender takes on a certain amount of risk, so they have to double-check that you are likely to pay your monthly, quarterly, or annual fee. However, it’s easier than you might think to qualify for a lease. Almost every business can get equipment for up to $50,000, and many can borrow much more.

The best way to find out what kind of deal you can get is to speak to your personal account manager. They can determine whether you need to provide a personal guarantee and what documents are required. In some cases, you can even get a line of credit in advance, which allows you to complete the leasing process faster once you’re ready to borrow some equipment.

Leasing for the Future

Businesses all over the country lease equipment because it allows them to avoid an upfront investment and provides more flexibility. What’s more, there are various options that suit companies’ needs, and most people qualify if they have been doing business for a while or if they have a solid financial background. To get started, you should figure out exactly what kind of equipment you need and then compile your financial documents.

Once you have everything in place, you can get in touch with your leasing company and discuss your situation. The expert assigned to you will offer you a lease and ask you to pay a deposit. Most contracts last for 12-60 months, and at the end, you can decide whether you’d like to extend your lease, buy the equipment, or return it.¬†Get in touch with us now at Noreast Capital to find out more about the equipment we offer and get the leasing process started.

Small Business Equipment: Is it Better to Lease vs Buy?

Expensive equipment is crucial for a wide variety of small businesses. Whether you work in the hospitality industry, construction, security, or you run an office, you’ll need to obtain furniture and specialized tools. Fortunately, there are various ways of gaining access to everything you need without having to purchase your items outright or get a loan. Instead, you can choose small business equipment leasing.

But is this latter option good for small businesses? Can you increase your business’s efficiency by leasing instead of buying? Often, the answer is yes because you can hold on to your capital, remain more flexible, predict your budget more easily, and select a leasing option that works well with your business model. Today, we’ll have a closer look at the difference between leasing and buying so you can choose the solution that suits you best.

What Is the Best Way of Gaining Access to Equipment?

There isn’t one best way of obtaining the equipment you need. Buying tools outright, obtaining a loan, and leasing are all viable options for small businesses. In fact, many companies, especially ones that require a wide variety of items, do all three.

Each of these methods of acquiring goods has advantages and disadvantages, and the one you choose depends on your individual risk profile, the needs of your business, and your future plans. Buying can be a great solution if you know you’ll need the items in the long term, but leasing is better if you’d prefer to keep your options open.

Small Business Equipment Leasing

When you lease a piece of equipment, the lessor remains the owner. They agree to give you access to the tool or machine for the duration of the lease term, which is determined at the start of the lease. Here at Noreast, we typically offer lease terms from 12 to 60 months. During that time, the small business pays a monthly, quarterly, or annual fee that covers the use of the piece of equipment and, depending on the contract, maintenance, and repairs.

When your lease is up, you have several options. Usually, you can choose to buy the item from the lessor, give it back, or upgrade to a different model and sign another lease. This flexibility is why leasing is such a popular option for many businesses.

Purchasing Equipment Outright

Sometimes, it may make sense to purchase a piece of equipment outright. If you choose this option, you have to pay the full price of the item right away, and you become its owner. If you know for sure that you will use a tool or machine for many years and won’t need to upgrade it, this could be a good solution.

However, many businesses find that purchasing all their items is too expensive, especially if they are just starting out or would like to expand their operations in the future. What’s more, owning all your equipment can be a hassle. Whenever you want to change the focus of your business, you first have to get rid of unwanted items, which can take time. When you lease your equipment, it can be given back to the lessor without any hassle.

Obtaining a Loan

Businesses that can’t buy their items upfront often consider a loan. When you finance your purchase in this way, you become the owner, but you only pay a deposit upfront, and the rest of the payment is spread over several months or years. Generally, loans are more expensive and less flexible than leases, but they could be a good option for business owners who don’t qualify for a lease.

Loans have built-in safety nets, so they are less risky for the lender. Therefore, people who have bad credit are eligible even if they can’t obtain a lease. But unfortunately, loans often require a down payment of 10-30%. This isn’t always the case with a lease, so the latter could be the superior choice for businesses that want to keep their capital.

What Are the Advantages of Leasing?

As you can see, there are various options for companies looking to purchase tools or machines. But while buying the items upfront or obtaining a loan can be suitable under certain circumstances, more and more people are opting for small business equipment leasing. Not only is this solution more flexible, but it also allows you to predict your finances more closely.

In addition to the above advantages of leasing, there is a great variety of leases currently available, so almost every firm can find one to suit them. The professionals at Noreast Capital can show you what the possibilities are and help you decide which one would meet your business’s needs.

Keeping Your Capital

One of the primary benefits of leasing is that you get to keep your capital. This is important for small businesses that are just starting out. If you’re setting up your company from scratch, you might not have any money to purchase machines, furniture, and tools, especially if you are also renting office or shop space. A lease can be the perfect solution because it allows you to open your business without having to do a lot of fundraising first.

But established or mid-sized firms that already have a decent amount of capital can also benefit from leasing. Business owners can save the money they would otherwise spend on equipment and use it to expand the company much faster. In this way, leasing can improve the long-term prospects of a business and help it to grow and expand.

Increased Flexibility

In the past, people ran their business in the same way for many decades. But in our fast-moving world, this is no longer possible. Brand-new technologies quickly become obsolete, and many businesses have to pivot several times per decade to meet customers’ demands. When you purchase all your equipment outright, you can’t change your operations unless you sell your items and buy new ones.

Often, this process involves significant losses because equipment depreciates quickly. By opting for a lease instead of an outright purchase, you can remain much more flexible. The average lease term is 36 months, and at the end of the contract, you can reevaluate whether you still need the piece of equipment or not. That way, you can change the way you run your business frequently and keep up with the times.

More Predictability

Many business owners believe that buying equipment outright leads to more predictable finances and lower expenses in the long run, but this isn’t always the case. When a tool or machine you own breaks, you have to come up with the money for repairs, or you have to replace it. But depending on your lease, maintenance could be included in your monthly or quarterly fee.

That way, you know exactly what you will spend each month, and there are no unpleasant surprises. What’s more, you don’t have to spend lump sums, and the cost of your equipment is more spread out. This facilitates budgeting and expense planning.

Great Deals for Everyone

Not every company has the same requirements. Small business equipment leasing is one of the most flexible options out there because there are many types of leases. When you speak to our representatives, they can help you choose the one that fits your firm’s current needs. If you’re a new business and haven’t built up a large customer base, you could opt to delay payments for a few months or pay increasing amounts as your profits grow.

Some professionals, such as accountants and gardeners, run seasonal businesses that are more in demand during certain times of the year. They might be well-served with a seasonal lease, which allows them to pay more during the busy months and less during quiet times. No matter what individual requirements your business has, you’ll find a suitable lease.

How to Find Out More

Now you know how a lease works and why it could be a good option for your business, you might wonder where to turn to. Many equipment manufacturers offer leases, but dealing with each one can be a hassle. Instead, you should contact a lender like Noreast Capital. We work with a wide variety of manufacturers and can therefore offer you all-in-one service.

From us, you can lease a wide variety of tools including specialized machinery, safety equipment, office furniture, and software. When you give us a call or send us a message, we’ll assign a specific person to your case. This professional can then help you with any questions and assist you as you lease equipment.

Almost every small business requires furniture, tools, or machinery. But if you’re just starting out, or you’re hoping to expand your operations in the near future, buying everything outright isn’t the best option. Instead, you could benefit from a loan or small business equipment leasing. Both possibilities allow you to spread out the cost of your equipment, but leasing has some additional advantages.

Because you can choose from a wide variety of leases, you can tailor the terms to your business’s individual needs. What’s more, you remain flexible because you don’t have to commit to a certain piece of equipment for the long term. Get in touch with us now at Noreast Capital to find out more about the financing options we offer and to fill out your application form.