Equipment Leasing and Financing

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How Does Equipment Leasing Work?

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FMV Leasing for small business

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 office equipment or other types 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 options like Fair Market Value or FMV leasing for instance 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.

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