Money & Finance
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Learn the Essentials of Equipment Leasing

If you plan to invest in new equipment for your business sometime soon, and
were considering a loan to finance the purchase, you might also want to look
into leasing as an option. If cash is in short supply, and the equipment you
need may become quickly obsolete, leasing rather than buying can be a good
option.

No matter what type of business you are in, almost any equipment you’d need
to buy also can be leased.  Companies of all sizes, from sole operators to
Fortune 500 firms, use leasing. According to the Equipment Leasing
Association (ELA), about $218 billion worth of equipment is leased by U.S.
businesses each year.

Leasing can conserve cash. While a loan usually requires that you invest a
down payment in the equipment, a lease generally needs no down payment
and finances only the value of the equipment expected to be used during the
lease term. And when you buy the equipment outright, you assume any risk of
it becoming obsolete. Leasing transfers the risk of obsolescence to the
leasing company, for a price, since there’s no obligation to buy the equipment
once the lease expires.

Leases are not loans, so their costs are calculated differently. Payments on an
operating lease are considered an overhead expense that you can deduct
from your business income. Generally, however, the cost of leasing is similar
to the cost of other financing options when you consider the entire transaction.

Flexibility is another leasing hallmark. You can tailor a lease to fit your month-
to-month, seasonal or annual cash flow needs. And if customers or the
competition demand that you always have the latest technology, a short-term
lease can help you get what you need and keep your cash.

The ELA, a trade group of leasing companies, has created a special Web
site called Choose Leasing that explains leasing basics.  Areas covered
include how to lease equipment, leasing benefits, loan/lease differences and
leasing terminology. The site also has a handy search feature to help you find
a leasing company. Visit www.chooseleasing.org.

To learn more about small business loans and leasing, contact SCORE
"Counselors to America's Small Business." SCORE is a nonprofit
organization of more than 10,500 volunteer business counselors who provide
free, confidential business counseling and training workshops to small
business owners. Go to www.scoredm.org on the web or call (515) 284-4760
between the hours of 10:00 A.M. and 3:00 P.M. Monday through Friday.