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Leasing equipment can help when starting new business

April 09, 2010|By BOB POOR

Q: We are looking at equipping a new small business but, so far, have been unable to come up with loans to cover the cost. Some have suggested leasing as a way for us to consider. What thoughts can SCORE provide us about utilizing leasing for our small business?

A: Not only does leasing help you conserve your cash, it also ensures that you don't wind up paying for equipment that quickly becomes obsolete or unsuited for your needs. Also, if you need the equipment only for a short time or special project, leasing saves you the hassle of having to be both a buyer and seller.

There is no limit to the type of equipment available for leasing or the size of the company that can access it. Even one-person operations can lease equipment.

Unlike loans, leases generally do not require a down payment. You're required to finance only the value of the equipment expected to be used during the lease term. Depending on the type of equipment and lease arrangement, you might also be responsible for routine maintenance and other costs. When the lease expires, the equipment goes back to the leasing company, completing your obligation.

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Leases are not loans, so their costs are calculated differently. You can tailor a lease to fit your month-to-month, seasonally 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 still keep your cash. Most leasing companies offer lease-to-own plans if you determine that purchasing the equipment is in the best interests of your business.

The Equipment Leasing and Financing Association (ELFA), a trade group of leasing companies and financial services companies, has a special section that explains the basics of leasing at its Web site, http://www.elfaonline.org. You'll also find guidance on leasing options and benefits, loan/lease differences, leasing terminology and a searchable directory to help find a leasing company to meet your needs.

To learn more about small business loans and leasing, contact SCORE, America's free and confidential source of small-business mentoring and coaching. SCORE is a nonprofit association of more than 12,000 business experts who volunteer as mentors. SCORE offers free mentoring and low-cost workshops nationwide. Go to http://www.score.org or call the local SCORE chapter at 301-766-2043.

Robert A. "Bob" Poor is a local small business owner/operator. He is a small-business counselor and a regular contributor to the Ask SCORE column. Questions may be e-mailed to him at r.poor@myactv.net">r.poor@myactv.net or by mail in care of The Herald-Mail, P.O. Box 439, Hagerstown, MD 21741, ATTN: Ask SCORE column.

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