The Balloon Payment (or Residual) is the final payment needed to finalise an equipment or…
If you are thinking about leasing business equipment, it is important to understand the options available.
To help you make an informed decision I’ve prepared the following checklist of important issues to consider.
Leasing Business Equipment - The Business Case
A key motivation for leasing business equipment is often its potential to generate income or improve efficiencies.
However, before outlaying any capital or seeking finance, it is important to “do your numbers” to ensure it stacks up financially.
Like any investment, you need to ensure the returns or gains you will make will outweigh the costs.
Business Equipment - Buy or Lease?
Many businesses choose the financing option because a monthly repayment provides greater flexibility and is less risky than a large capital outlay.
A key part of what I do as an Equipment Finance Specialist is help my clients align repayments to their cash flow.
One size doesn’t fit all – it is so important your repayments are correctly structured at the outset, to avoid problems down the track.
Innovation and technology updates can mean what was “state of the art” at the time of purchase, is obsolete within a relatively short timeframe.
If the equipment you use depreciates quickly or requires updates the cost of staying current can be huge.
In these circumstances purchasing it outright could be an expensive mistake.
A better option may be to rent the equipment from a Financier using an Operating Lease.
Choose the Right Product
An Operating Lease is ideal for equipment that depreciates quickly, or which uses technology that changes rapidly.
Avoiding "All Your Eggs in One Basket"
Many business owners use Equipment Finance to build a relationship with alternate Lenders (including major Banks) external to their core business and personal financing.
This is possible because the finance is secured by the asset being financed.
It can help avoid eroding core borrowing capacity and importantly, cross collateralisation of other business or personal assets to the borrowing. It still involves documentation etc, but once set up, can provide faster access to the equipment you need.
As I have outlined above there are several factors that need to be considered when Leasing business equipment.
The key to a successful outcome is planning and where needed asking questions.
If you have a need or would like to learn more don’t hesitate to give me a call.