For a start up business, applying for a bank loan can prove to be difficult especially for those with no business credit history.  If you need financing to obtain equipment, devices or vehicles, why not consider equipment lease financing?

Who Can Lease

Both start up and established businesses can qualify for an equipment lease.  In fact, this method of financing is being implemented by small businesses and large corporations in the industry.

Why Lease Equipment

Instead of taking a loan to purchase the equipment you need, a new business owner may choose to apply for a “lease” to avoid the unnecessary delay with the business operations.   Rather than wait for months to get their business loan approved, a business owner can get a lease at a much sooner time and proceed with the operations.

Furthermore, equipment lease financing is more cost-effective since no down payment is required and payments are made in instalments.  Many lessors offer flexible repayment terms (monthly, quarterly, bi-annual, annually) to match the business’s financial capability.

Yes, equipment lease financing is ideal for small business entrepreneurs who have a limited budget.  Through leasing, you can use your working capital on other expenditures such as purchasing supplies, hiring workers, advertising your products and services, etc.

Preparing Paperwork

What are the documentations that you need to prepare?  The specific documents required may vary from one leasing company to another.  However, most lessors will expect you to provide your written equipment lease proposal, recent financial statements, and tax returns for the previous year.

In your lease proposal, you must clearly define the nature of your business, why you need to obtain a lease, the types of equipment you need, and other significant details that will help convince your lessor to grant you an approval.

Check Your Credit

Some equipment leasing companies are strict about granting approval and may demand good to excellent credit history.   However, there are companies that also offer leasing to clients with no credit history, who are credit challenged or with bad credit history.

In fact, even business owners who have been discharged from bankruptcy have the chance to get approved as well.  If you have bad credit, you may need to submit a written explanation about your credit history along with your lease application.

Tips For Sure Approval

If you are a start up business, do not try your luck by submitting multiple lease applications to various companies.  If a potential lessor sees the inquiries made by other leasing companies, it may raise doubts as to why other lessors rejected your application.

Take note that not all leasing companies offer lease for businesses that are less than 2 years in the industry.  You need to look for a lease provider that does offer this special lease arrangement.

Get to know the prerequisites of a particular leasing company so you can prepare your paperwork in advance.   Also, you need to choose a leasing company that particularly caters to your kind of business.  For instance, some lessors specialize in providing transportation while others may specialize in medical equipment, printing equipment, baking equipment, etc.

About the author: Lai Castillo is an equipment leasing broker that specializes in providing business financing for both startup and established businesses.