Equipment leasing - what it means and the way to use it for funding assets for your business

By: Amanda Paxman

If you are in the marketplace for equipment leasing then it will not be hard to source an acceptable finance provider. There are equipment leasing options on the market for pretty much any asset a business might possibly need ranging from engineering equipment through to office equipment. Even though it might not be instantly apparent, the company giving the lease financing is in the majority of cases not the same company that's selling you the asset. You will usually get a referral from the company selling the equipment to their chosen finance company.

Like all areas of commercial procurement you should aim to get many proposals when selecting an equipment leasing company. You often will get a proposal straight from the equipment vendor if the situation is uncomplicated. This ought to be a competitive proposal as the seller is incentivised to ensure that they'll make sales of their equipment. Always be realistic and recognise that you may not get the most effective quote for your circumstances. Search around and get multiple quotations from different suppliers.

Asset finance is a wide-ranging expression describing the various strategies that are used to enable the acquisition of assets for a business. In some instances the equipment is never really owned by the business as the finance supplier retains ownership of the asset. The key purpose from the business owners perspective is that they get the utilization of the equipment in return for frequent repayments. In general what's significant to a business is that they will utilise an asset, regardless of whether or not they directly be the owner of it or not, to enable their firm to work efficiently and deliver higher levels of success.

One form of equipment leasing is where a firm enters into an Operating Lease. In this case the asset belongs to the finance company who in effect hires the asset to the lessee over an agreed period (typically one to 5 years). At the end of the contracted term the finance company can either sell the asset in the second hand market or lease it another time. This means that the lease payments will be kept low because the complete asset worth will not need to be recovered by the finance company during the first term. At the end of the lease term the asset is either given back to the finance provider or a further lease agreement might be put in place.

A conventional type of asset finance is called Contract Hire. This is a different form of operating lease and is typically used for acquiring vehicles. Most contract hire contracts include several possible service features like maintenance, replacement throughout repair, management, etc. When contract hire is employed the lessor retains ownership the asset. The method in which the rental payments are decided relies on a residual price of the equipment after a predetermined period has ended. This means that the value calculations include a charge to recover the asset depreciation throughout the course of the rental period.

Article Source: http://www.myhotarticles.com

It is logical to get several proposals for equipment leasing. You usually will get a quote straight from the equipment vendor if the case is straightforward.

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