Buy or lease? That’s an important question that many businesses must consider when the time comes to acquire new equipment, furniture and other business essentials. While equipment and other assets with a projected long, useful life may be better off purchased, leasing makes sense for many other items, including technology, material-handling or medical equipment that may need continuous updating.
Many companies consider leasing as a type of insurance, according to Bob Metzen, president of LaSalle Systems Leasing Inc., a wholly owned subsidiary of MB Financial Bank NA.
“Leasing equipment and other major business assets provides a business with protection from obsolescence, and a hedge against a long-term commitment to assets that a user is not certain he may need indefinitely,” Metzen says. “Leasing eliminates the need for a long-term financial commitment to equipment that will need upgrading, replacement or removal within a time frame that is shorter than an asset’s projected useful life.”
Leasing also helps businesses conserve cash flow, senior borrowing capacity and may even provide some tax benefits.
According to Metzen, it’s important for a business to consider how to effectively use lease financing. Securing a lease line of credit to pay for equipment and other business assets is a smart way to finance such acquisitions, especially when a company will have ongoing equipment upgrade or acquisition needs. A lease line of credit is a convenient alternative vehicle for acquiring and financing equipment.
Smart Business spoke with Metzen about the benefits and process of securing a line of credit to purchase equipment.
Why should a business consider securing a line of credit for leasing equipment?
A lease line of credit provides businesses with flexibility and convenience. Once a lease line has been established, a business can tap into the line and acquire the equipment they need whenever necessary, with no need to continually reapply for credit or renegotiate terms or documents. It eases much of the administrative burden associated with acquiring equipment.
How can a business secure a line of credit for leasing equipment?
The process is pretty quick and painless. Once the company has determined that a line of credit is necessary, they simply need to contact a customer service representative at a lending agency that offers this service. We typically require a business to provide two years’ worth of financial statements as well as a current interim financial statement to help us determine the company’s creditworthiness.
They’ll also need to have a general idea of what type of equipment will be leased and how it will be used. Oftentimes the credit application is processed within one or two business days.
What should a business know or do before attempting to secure a line of credit for leasing equipment?
As I mentioned, the company should have a pretty good idea of what kind of equipment they will be leasing and why they need to acquire it. They’ll also want to know the general terms of the lease and of course, how much money they need to borrow.
What types of equipment can a business obtain through a lease line of credit?
Virtually anything can be obtained through a lease line of credit. (Often) businesses use lines of credit for leasing information technology, furniture, material handling and sometimes even production equipment. Generally, leasing is a great option for anything that a company needs, but doesn’t want to make a long-term financial commitment to.
What payment options or terms are available for leasing equipment with a line of credit?
The nice things about lease lines of credit are the tremendous flexibility and varied options available. Structures with varying lease periods and payments (monthly, quarterly, etc.), upgrade or technology refresh provisions, and purchase, release and return options are available.
Lease terms are generally very flexible and cater to each customer’s individual needs. Other term options to consider include the length of time the line of credit will be used and whether or not a business is interested in a lease-to-own option.
Bob Metzen is president of LaSalle Systems Leasing Inc., a wholly owned subsidiary of MB Financial Bank NA. He has more than 15 years of experience in the technology and leasing industries. Prior to joining LaSalle, Metzen, a Certified Public Accountant, held public accounting and leasing positions with Price Waterhouse and Harbor Capital Corp. Reach him at (847) 823-9600 or firstname.lastname@example.org.