How Does Equipment Leasing Work?

Running a small or medium-sized business can be hard work, particularly if it involves renting a physical location and purchasing a lot of expensive equipment. For this reason, the vast majority of U.S. companies use equipment leasing in a part or all of their operations. Not only can this kind of agreement free up cash and spread out the cost, but it can also be personalized to a business’s particular needs.

There are many types of leases that cater to the needs of various businesses. While most will use a standard lease plan, some startups or seasonal companies might benefit from specialized plans that take their individual situation into account. With a simple application process and flexible plans, Noreast Capital can help vendors to set up great plans for their customers. Let’s have a look at the leasing process and how it could help you grow your business.

What Is Equipment Leasing?

Sometimes, it doesn’t make sense for people to purchase a piece of equipment up front. For example, if it is very expensive, they have to furnish an entire business at once, or they only need the equipment for a short time, it might not make sense to buy equipment outright. In such a case, they can borrow it from a vendor instead.

In its simplest form, the setup is a rental service, where the lessee agrees to pay the lessor a certain amount of money for the use of the equipment. Payments are usually periodical, and in most cases, the lessee will have to pay a fee once a month. Once the lease agreement ends, it can either be extended, the piece of equipment can be given back or bought, or the lessee can decide to upgrade to a newer version and sign another lease.

Types of Leases

Just like other financial products, there are many options when it comes to choosing a lease. While some agreements will offer a lower monthly payment, others come with the right to buy the piece of equipment cheaply at the end of the plan. Depending on what a customer or business needs, they will opt for a different plan. Here at Noreast Capital, we provide a number of standard and specialized leasing plans that will suit different people and businesses.

Standard Lease Plans

There are various standard lease plans that can be offered to your customers. Those who are certain that they would like to buy the piece of equipment at the end of their lease will be well served with a $1.00 Buy-Out plan, which stipulates that they may purchase the goods for $1 once the agreement ends. People who opt for a Fair Market Value lease benefit from more flexibility and a lower monthly payment.

Once their lease is over, they can extend it, give back their equipment, or buy it at a fair market price. A 10% Purchase Option lease offers the customer the chance to buy the piece of equipment at 10% of its original value once the agreement ends, extend the lease, or terminate it. In most cases, the cheapest plan is the 10% Security Deposit lease, which requires customers to pay a deposit that will be returned to them once they give back the equipment.

Step, Deferred, or Seasonal Lease Plans 

Some businesses might have special requirements and benefit from an alternative option. For example, if a company is very new, they might not yet have the means to pay the full monthly fee, so a step lease plan can help. This allows them to pay a lower fee at first, which will then be increased as time goes by and their business starts to pick up.

Alternatively, a deferred lease plan can offer them the option to start payments only 60-90 days after the beginning of the lease. This is a great plan for brand-new businesses that might not have cash flow initially. A seasonal lease plan works well for businesses that operate at reduced capacity during certain seasons. They can pay more when their business is strong and then stop paying during the slow months.

How Can You Set Up Leasing for Your Customers?

The easiest way to set up leasing and attract more customers is to use a service such as Noreast Capital. By involving professionals, vendors can make sure that their leasing contracts are solid, they will be making a profit, and they are offering exactly what prospective customers are looking for. When a vendor gets in touch with us by filling out the online form, they’ll be approved within 2 hours, and our account managers will get in touch.

Our representative will ask about your product and who might want to lease it, then discuss with you what terms would be best suited to this kind of customer and how you can set up a leasing agreement. They might also speak about how you can get the word out, so customers know that you are now also offering leases. In fact, Noreast Capital serves businesses in all U.S. states, so you’re likely to find new customers through national exposure.

What Are the Benefits of Leasing? 

Now that you know what equipment leasing is and how it works, you might wonder why it’s worth it to both vendors and customers. Wouldn’t it be simpler for the vendor to sell a piece of equipment? And wouldn’t businesses save money by buying their goods upfront? Although leasing adds to the bill, the vast majority of U.S. businesses aren’t able to buy all of their equipment up front, so they opt for a lease instead.

By offering this option, vendors who sell goods to other businesses can cater to all kinds of firms, from small one-man operations that are just getting started to large businesses with hundreds of employees. An estimated 80-85% of companies lease at least some of their equipment, so the market is vast and the demand is there.

A Smaller Bill Upfront

Many businesses, especially those that are just getting started, don’t have large amounts of cash available to purchase their goods. For this reason, they are looking to use someone else’s equipment and pay a monthly fee instead. As mentioned, there are different plans to suit the needs of various companies, so a startup might benefit from a step lease plan and an established business might go for the 10% Security Deposit lease to lower their costs.

For vendors, leasing can be a great source of regular income. While an upfront payment is a simple, one-off transaction, a lease agreement goes on for many months, so the vendor can gain regular income. This can make budgeting easier. They will also make more money from the product they are selling since people who lease their equipment generally pay more in total. Both of these factors can make leasing a great business opportunity.

More Flexibility 

When setting up a business, flexibility and a healthy bank balance are key. Leasing allows business owners to spread out the cost of their new equipment over several months or even years, so they can hit the ground running. They will also have a lot of control over their budget because the monthly payments are likely to remain the same over time, which makes planning ahead and managing the company’s finances easier.

A Simple Application Process 

If you’re a vendor, you can easily apply to Noreast Capital using the online form. It should take you only minutes to fill out, and we’ll respond within two hours. You will be contacted by a customer service specialist, who will take you through the different options and tell you more about how to sign up.

Your customers looking for a lease will undergo a similarly easy process. We aim to keep our lease documents very simple and to two pages or less, so everyone can be confident in what you are signing.

Who Can Take Part?

No matter what type of business you’re in, leasing might be a great option to expand your operations. Almost everyone needs some kind of equipment, whether it’s physical or virtual such as a website. Our partners come from a wide variety of backgrounds that include the hospitality sector, medical fields, construction, and manufacturing. However, we also work with firms that lease electronic equipment, software, and even emergency vehicles.  

Equipment leasing is a great tool for businesses who want to cut down or spread out the initial cost of their equipment. It offers more flexibility than an upfront payment and allows business owners to keep their cash flow healthy. As a result, businesses can use their resources more efficiently and expand faster. For the vendor, leasing can be a stable source of income and a way to attract a very large customer base.

The easiest way to get started is to enlist the help of professionals, who will be able to advise you every step of the way. If you’re a vendor, your dedicated account manager will help you to determine the best leases for your type of equipment and get you set up with simple agreements that won’t confuse prospective customers. Call us at Noreast Capital to find out more and get started.

What Are the Advantages of Leasing Equipment for Your Business?

There are so many hidden advantages of leasing equipment for your business! It’s an especially excellent option for businesses that want to grow their company but don’t have the capital. In addition, it allows companies to make investments in the future without spending all of their money at once.

You can use leasing as a tool to help you achieve all your goals and dreams for the business, no matter what they are! Here are some of the most impactful ways that leasing can boost your business:

What Are the Advantages of Leasing Equipment for Your Business?

Lower Cost Up Front

Leasing typically offers upfront cost savings since you’re able to spread the cost of equipment over a specified term, and there are no down payments required. Fewer upfront costs result in additional cash flow when compared with traditional financing methods. In addition, when you choose to lease, your business doesn’t have to use up existing lines of credit or bump up credit limits.  

Many businesses are able to pay for their equipment using lease financing before they would have been able to purchase it outright with cash or other forms of credit. Lease your equipment to save money on business expenditures (bank lines) for day-to-day operations, growth, or unforeseen business costs.

Get Equipment Faster

Getting a bank loan to purchase equipment can take weeks before you get approval. But leasing from us is lightning fast! You need only use our online credit application tool to request financing, and you’ll receive a reply within four hours – sometimes as quickly as 30 minutes!

Our documentation turnaround time is similarly fast; we can email, fax, or courier the documents overnight. Often, we can have everything set up within 24 hours. And the sooner you get approved and signed, the sooner you can get the equipment you need to make your business grow and thrive.

Flexible Payment Terms

Leasing gives you the ability to make low monthly payments as well as options for buy-out or end-of-term purchases. Also, we can provide your business with excellent credit terms and flexible payment arrangements that allow you to get the low monthly lease payments you need.
You can easily spread the cost of the equipment out over an extended period of time, so you’re never spending more than you’re making. Furthermore, we offer a selection of unique leasing plans tailored to your business needs. Some examples include:

$1 Buyout

Choose this plan when you’re completely certain you will want to buy out the equipment at the end of the lease. When your term is up, you purchase the equipment for a dollar.

Seasonal Lease 

If you have a seasonal business that’s closed for certain months during the year, this is a great option for you. This way, you only make payments during the months you’re open for business.

Deferred Payment

If you need the extra time, we can accommodate you. With this plan, you only begin making lease payments 2-3 months after you obtain the equipment.

Fair Market Value

This is a fantastic, flexible option for businesses that want to keep their options open! At the end of the lease term, you can choose to extend the lease, return the equipment, or purchase it at its fair market value. We even offer financing options for the last choice.

Consistent Monthly Payments 

Leasing enables you to use only the equipment you need within a budget that works for you. Once you’ve agreed to the best leasing option for your business, you pay the same rate every month for the duration of your term. Even if there is a sudden increase in interest rates, your payment stays the same. Predictable monthly payments can be a lifesaver for your business!

Save at Tax Time

Lease financing may help your company save money in taxes. Often, lease payments are 100% deductible, as it’s considered an operations expense. For example, section 179 of the IRS Tax Code enables a business to subtract the total price of certain equipment the year that it is purchased.

Some equipment may not qualify, but even then, you might be able to claim a depreciation deduction. It all depends on the business and equipment, so always ensure you check with your tax advisor to determine which savings apply to you.

Less Risk

Buying equipment outright can be risky, even if you have the capital. Marketplaces can change overnight due to the fluctuations in the economy and other unpredictable factors. Just look at how the pandemic has affected businesses!

But leasing equipment means you don’t have to worry about losing your investment. And if anything goes wrong, you’re only responsible for the lease payments, not the depreciation of the equipment itself. Leasing offers 100% financing, meaning your business won’t be responsible for any of the capital upfront. If something goes awry during the lease term—like a natural disaster—you can usually return the equipment without penalty.

No Maintenance Costs 

Most leases include scheduled maintenance and regular inspections, reducing the amount of equipment downtime your company experiences. If something breaks from regular use, you don’t own it, so you don’t have to pay anything for someone to come and repair it. Likewise, you don’t have to waste valuable time and resources looking for a repair company or replacement material.

Stay Ahead of Your Competition

Perhaps one of the most significant advantages of leasing equipment is that you can affordably obtain all the latest, cutting-edge equipment that enables your business to run at peak efficiency. That means you can keep up with competitors and deliver exceptional customer service that keeps your clients coming back for more.

For example, installing the latest office telephone system that can accommodate a higher volume of calls means you can deliver on projects more quickly and efficiently than the competition. That kind of service gives you an edge, even if your competitors are a bigger company.

Escape Obsolete Equipment

If you work with technology or equipment that needs regular updating, leases work to your advantage – you’ll never be stuck with old equipment because you don’t own it! If your equipment becomes obsolete or no longer functions as it should, leasing gives you an easy way out to avoid costly repairs or replacement costs while keeping up with current technology. Leasing offers the flexibility to make confident, informed decisions on what updates are needed without the long-term commitment.

Improve Safety and Security 

Businesses that own their equipment will naturally try to get the most mileage possible before replacing it. But depending on outdated equipment can be detrimental to the business’s safety and security. For example, old computers can pose a security risk if not replaced or adequately maintained.

Similarly, old vehicles can break down at the worst possible time. Electrical equipment could break and cause a fire. But by leasing your equipment, you never run the risk of such problems because you’ll never need to hold onto old equipment in an attempt to save money.

Improve Your Finance Options

Leasing conserves your capital. Instead of being treated as long-term debt, lease payments are reflected as a business cost. That means less debt on your balance sheet, opening you up to better financing options that support your business. It also preserves your lines of credit so you can save that reserve for emergencies or other projects. That extra capital gives you a cushion to operate on.

Product and Leasing Expertise 

Another benefit to leasing the equipment is your leasing company has comprehensive expertise on the product you’re using. That means that we can not only hook you up with the best leasing solution for your business, but we will arm you with the optimal equipment and show you how to use it most effectively.

There’s no need to hire an in-house professional to set up the tools or train your staff. For example, if you’re renting network equipment, you would likely need to hire an IT person to set it up and maintain it. But when you’re leasing the equipment, we take care of that for you!

Flexibility for Your Business to Evolve

Because of the transient nature of leasing, you have the freedom to plan and change your equipment needs as your business grows. For example, if you’re planning an expansion but don’t know how big a company you’ll be in five years, leasing can help protect your cash flow while still facilitating growth. Then when business is booming, and you need to scale your equipment needs, leasing easily allows you to upgrade your assets.

The numerous advantages of leasing equipment make it a no-brainer for many businesses. And with so many flexible lease options at your disposal, you can get the gear you need on just about any budget or timeline.

Whether you’re looking for short-term leases for office equipment or long-term leases for restaurant products, there’s something for everyone! So if you’re ready to get the products you need to accelerate your business to new heights, contact us at Noreast Capital today!