How to Obtain Equipment Lease Money

Commercial lease money can be a simple and relatively inexpensive alternative method to pay for capital equipment, reserving your cash, credit facilities and general borrowing power.


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    Determine your equipment, shipping and installation costs, down payment requirements and so on (approximates are acceptable). Take quotes from potential suppliers of your desired equipment.
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    Compile your company's most recent interim financial statements, last 3 years of annual financial statements and configuration/cost of the equipment to supply to your prospective leasing companies.
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    Identify capital equipment costs and build equipment package: i.e., Costs of actual equipment, installation, training, shipping, deposits, taxes and any additional expenses related to your project. *The easiest way to do this is by obtaining quotes or invoices from your vendor(s). If you do not have quotes or invoices available, you will need to break down make(s), model(s) and costs of the equipment you are acquiring; You will also need to pull spec sheets for any major pieces of equipment your anticipate acquiring.
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    Build your Financial Package: All leasing companies providing financing for $100,000 or more will require you to send them a financial package that consists of your company's past 3 years of Audited, Reviewed or Compiled Corporate Financial Statements. Most leasing companies will also need some type interim statements, containing reviewed or internal year-to-date Balance Sheet & Income Statement (Profit & Loss Statement). If your company is an LLC or S-Corporation, pending on your company's equity structure (but almost always with S-Corps) you may need to provide the leasing company with personal financial statements. If you do not have a personal financial statement, your Lease Consultant can literally put one together for you by asking some you some basic questions over the phone. Make sure you answer honestly, or closely, as the agent will need to fax the statements together to obtain your signature verifying the statement's accuracy. If your company has what is deemed as a "harder credit" or "has some hurdles" or whatever flowery term your leasing agent uses to describe a difficult transaction, he may ask you for a Proforma invoice, or cash flow statement, at which time you need to consult with your accountant if you have not already. Do not attempt to provide the Leasing Company with any information you do not have available, or cannot easily be put together. Simply tell your agent you do not put together these types of data.
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    You're ready to fight the hounds! Once you have completed steps 1 and 2 you are ready to fend off any leasing company and their many questions, saving you a great of time and sorting out the agents of experience with the Newbies to leasing. Once you compile your Financial Package and Equipment Package into one readable piece the package should suffice any leasing company with adequate information to get them to start talking numbers and options with you. Also, before you start prospectively looking at leasing companies you need to have an idea of what type of term length and of term options you are seeking. If you do not know, consult with your accountant, and also ask, though ask cautiously (trust your gut) your Leasing Guru's suggestions are. If you find a good leasing agent, he will have less interest in how much he is going to make on the deal and more interest in getting you the most ideal structure to satisfy your needs.
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    Find a reputable Lessor: When first looking for a leasing company if you are only buying one major piece of equipment consult with the vendor and see if they offer financing. If you know and trust your vendor salesperson see if he can refer you to an associate leasing company, or knows a good Leasing Agent or broker that can help you. If you are left to contact a leasing company on your own, but haven't the slightest where to start, google it!. If you are a drilling company located on the outskirts of Cheyenne, WY and you're calling a company out of Los Angeles, CA That's fine! There are probably not a lot of leasing companies in your area, and the leasing agent out of the Los Angeles based company may be more professional and may have greater means to better service your company, than Bill Bottoms from your local bank anyway. 95% of the business most leasing companies do is completed for companies that are located outside of their same state. Just make sure that whatever leasing entity you go with, that it is listed with the ELA (Equipment Leasing Association), and the UAEL (United Assoc. & Equipment Leasing). This information should be on the splash screen of your prospective leasing company's website. If these associations are not listed and its not GE Capital (the largest industry player by far), you need to look somewhere else. If a leasing company is listed on the ELA, or the UAEL, and in good standing, the leasing company will absolutely reference this on their website and probably letterhead too. You should feel comfortable discussing your project with companies listed with these organizations and they should be deemed as "creditable" sources. If a prospective leasing company is not listed with BOTH* of these associations, seriously, run for the hills, they either have either engaged in unethical business practice (getting their company blacklisted)or the company has not been around long enough (5+ Years) to gain acknowledgment in the industry.
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    Show me the money!: After finding your new prospective leasing company that is listed with BOTH the ELA and the UAEL, you need to start looking at options. After speaking with several leasing companies, you have narrowed your selection down to about 3 sources that you want to potentially do business with. You will need to send your Equipment & Financial Package to these companies, and they will in turn offer you a "Formal Proposal" or "Letter of Intent" containing an offer or offers to finance your equipment. You will need to speak with each leasing company to understand completely what they are offering, and what works best for you. To do this, you need a type of weighing tables, so to speak, such as: Is having a low payment the most important thing to me? or is getting this thing paid off and having the lowest possible interest more important? By answering these types of questions to yourself, you will be able to push through the leasing agent's and broker's hype and hysteria, and you will be able to make an educated decision as to which company's proposal best serves you to pay for your equipment. You will need to sign the proposal and send in a deposit check, of which is showing your commitment to the deal. You need to verify that your deposit is 100% refundable if the company does not credit approve the transaction as proposed (get this in writing).
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    What do you mean you need more INFORMATION?!: Your leasing agent may ask you for additional pieces of information that he did not require of you when he originally proposed on the transaction (thank him, he was being kind to you). He may need to collect final pieces of information about yourself, your vendor or your business to get the FINAL PACKAGE into Credit.
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    Credit Process: The Credit Process typically will take somewhere between 3 - 15 business days after the leasing company receives your signed proposal, deposit check and your FINAL PACKAGE (future reference: the signed proposal and deposit check are part of the FINAL PACKAGE).
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    Lease Documentation: After the leasing company has gotten your deal Credit Approved, it will need to send you a master lease agreement and all related documentation, of which you will need to sign correctly and probably sign two duplicate copies and get back to the leasing company ASAP. The leasing company will not be able to pay your vendors until you do this.
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    Funding: You're done! 9 steps later, your deal has funded. The leasing company has paid for your equipment, and you over a duration of time that you agreed to will pay the money back. Through this process you will have learned a great deal of things for the next time, but hopefully, you first run through you were able to satisfy your cash flow requirements, obtain off-balance sheet financing, save your own cash for more lucrative investments or other forms of reinvesting into your business, and you have reserved your operating line and main borrowing power through your bank. You have accomplished all of this with (though it probably doesn't seem like it after reading my overly involved steps) with relatively little time, at a slightly higher or lower cost of capital than what your lead bank would have charged you. Congrats!


  • Try to work with a direct-source lender if you can. There are, however, times when an individual Lease Brokers can be beneficial to you, if very specific financing requirements, such as a corporate only guarantee, difficult credit (low or par credit), custom-type equipment and so forth. If your vendor refers you to a broker he has worked with extensively, use the broker*. That broker should know your industry extremely well, and should have a multitude of contacts that put capital into your industry. A Broker in this scenario may get you the best deal for your needs and will save you time, fight battles for you and may save you money in the end. Brokers will have incorporated a fee of 1 - 2% into the transaction you are signing up for. Even with this said, if he is working on a difficult, overly complicated transaction for you, his/her 1 - 2% is nominal in comparison to the time, money and frustration he/she has saved you.


  • If a deal sounds too good to be true, it is! There are revenue generators added into 2 page proposals that sophisticated Chief Financial Officers with Fortune 500 Companies miss. If your gut says, "don't do it Johnny," either don't do sign off on the deal, or get a second opinion. Most leasing companies are pretty clear about their offering, but some are definitely sneaky. If everyone else is coming in at 9% on a $1 out deal, and one shows you 6.5% and it's not a tax lease, be concerned. If your normal borrowing is somewhere between 7.75 - 9.25%, your 6.5% guy is offering you gold! But probably more likely, a dud deal to get it off the street and is going to switch the rate at the 11th hour after you have given him your deposit check and your vendors calling you screaming.
  • Credit Process: If the leasing company is backpedaling, making excuses, or anything else and you're into week 2 of the credit process, it's time to be concerned. Remember that other leasing agent who told you the deal sounded fishy? And he said he could get your deal credit approved and ready to fund inside of one week if you needed him to save the day and you felt you believed him? Might be time to call him. You need to at some point stop listening to your sub-par leasing company that sold you on a killer deal, and start listening to your stomach and the real deal next door.

Things You'll Need

    • Your Negotiating skills 101 Starter Manuel, some guts to enter into new territory of leasing, instinct & some smarts.
    • Your equipment package, as described in Step 1.
    • Your Company's past 3 years of Audited, Reviewed, or Compiled Corporate Financial Statements as described in Step 2 (By the way, compiled statements are tough for leasing companies to get through, if you only have compiled or internal statements make sure you provide the leasing company with corporate tax-statements to reference).

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Categories: Funding