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Missouri Forest Products Speech sept 2005

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Ian Liddell
Ian Liddell

The document discusses the benefits and common myths around equipment leasing for small businesses. It outlines how leasing can help businesses preserve cash flow, have flexible financing options, and take advantage of tax benefits. The document also provides tips for small businesses to get favorable lease terms such as maintaining good personal credit and establishing a track record through installment loans.

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Equipment Financing for 21st Century Tools To Make A Cost Justification For Acquiring New Equipment
Common Perceptions of Error Focus on interest cost not opportunity cost. Leasing companies charge higher rates than traditional banks Leases cannot be paid off early or rewritten
Profile of Typical Financer 2 to 5 years time in business Growing faster than cash available Under $ 2 million in annual sales Less than 10 employees Prefers to minimize after tax profit Intensive / continous equipment needs Good personal credit pays their bills
10 Common Myths Cash doesnt cost a cent Opportunity cost Lease companies dont like to finance used equipment, auctions or private party sales Established businesses dont lease their equipment ( tax savings over convenience) Credit cards offer lower rates than leasing New businesses lease more often than established
Equipment Lease History 2010 BC - City of Ur leased agriculture tools to land owners 1700s - United States - Liverymen leased horses, buggies , & wagons 1870s - Railroad cars & barges 1954 - Modern Leasing - US Leasing Corp
Lease Classification Large Ticket Leasing - $ 500,000 + Mid Ticket Leasing - $ 100,000- 500,000 Small Ticket Leasing - $ 2000-100,000 --- Application only , typically no financial statements , what well be discussing
History/ Statistics 1960s - Xerox , IBM popularize leasing 2002- $ 240 Billion Leased 80% of Small Businesses Lease Equipment 35% of All Equipment Lease Financed
10 Common Reasons to Lease Preserve Cash Flow & Working Capital Convenience Tax Savings Fixed Monthly Payment Easy to Budget for Future Equipment Need Flexible Financing ( ie Seasonal Payments)
Ten Common Reasons to Lease Convenience fast response to immediate opportunities Preserve Cash Flow Keep Bank Lines Of Credit Available Consistent budgeting 110 % Financing Shipping / Install Tax Writeoffs Flexible Financing Deferred/Skip/Seasonal Immediate ROI / Profitability
Type of Leases Available Finance $1 buyout- Conditional Sale True/Operating Leases- 10% / FMV Operating Leases Equipment Finance Agreements
Steps to Favorable Terms Keep personal credit score high * no slow payments ( revolv/install) * low revolving debt - credit card debt ( consolidate into home equity line) * reveal any issues ( ie divorce, identity theft) * Establish installment loans early on Update your D&B Report regularly report suppliers Provide bank statements Reveal any comp credit borrowing
Getting Terms for New Businesses Share Business Background/Experience : Cost Justify ROI > monthly lease payment Show Additional Sources Of Income Always offer spouse as guarantor Provide all owners as pgs even silent ones Share comp credit - other leases or loans.
Conclusion You need to decide for yourself if leasing is right for you . Determine long term equipment needs Dont always believe your business associates, banker, or friends. Use lease payments as cost justification to evaluate equipment purchase.
Resources Available Equipment Lease Association : http://www.chooseleasing.org/ http://www.chooseleasing.org/informed/Articles/SmallBusiness.pdf Free credit report - https://www.annualcreditreport.com/cra/index.

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Missouri Forest Products Speech sept 2005

  • 1. Equipment Financing for 21st Century Tools To Make A Cost Justification For Acquiring New Equipment
  • 2. Common Perceptions of Error Focus on interest cost not opportunity cost. Leasing companies charge higher rates than traditional banks Leases cannot be paid off early or rewritten
  • 3. Profile of Typical Financer 2 to 5 years time in business Growing faster than cash available Under $ 2 million in annual sales Less than 10 employees Prefers to minimize after tax profit Intensive / continous equipment needs Good personal credit pays their bills
  • 4. 10 Common Myths Cash doesnt cost a cent Opportunity cost Lease companies dont like to finance used equipment, auctions or private party sales Established businesses dont lease their equipment ( tax savings over convenience) Credit cards offer lower rates than leasing New businesses lease more often than established
  • 5. Equipment Lease History 2010 BC - City of Ur leased agriculture tools to land owners 1700s - United States - Liverymen leased horses, buggies , & wagons 1870s - Railroad cars & barges 1954 - Modern Leasing - US Leasing Corp
  • 6. Lease Classification Large Ticket Leasing - $ 500,000 + Mid Ticket Leasing - $ 100,000- 500,000 Small Ticket Leasing - $ 2000-100,000 --- Application only , typically no financial statements , what well be discussing
  • 7. History/ Statistics 1960s - Xerox , IBM popularize leasing 2002- $ 240 Billion Leased 80% of Small Businesses Lease Equipment 35% of All Equipment Lease Financed
  • 8. 10 Common Reasons to Lease Preserve Cash Flow & Working Capital Convenience Tax Savings Fixed Monthly Payment Easy to Budget for Future Equipment Need Flexible Financing ( ie Seasonal Payments)
  • 9. Ten Common Reasons to Lease Convenience fast response to immediate opportunities Preserve Cash Flow Keep Bank Lines Of Credit Available Consistent budgeting 110 % Financing Shipping / Install Tax Writeoffs Flexible Financing Deferred/Skip/Seasonal Immediate ROI / Profitability
  • 10. Type of Leases Available Finance $1 buyout- Conditional Sale True/Operating Leases- 10% / FMV Operating Leases Equipment Finance Agreements
  • 11. Steps to Favorable Terms Keep personal credit score high * no slow payments ( revolv/install) * low revolving debt - credit card debt ( consolidate into home equity line) * reveal any issues ( ie divorce, identity theft) * Establish installment loans early on Update your D&B Report regularly report suppliers Provide bank statements Reveal any comp credit borrowing
  • 12. Getting Terms for New Businesses Share Business Background/Experience : Cost Justify ROI > monthly lease payment Show Additional Sources Of Income Always offer spouse as guarantor Provide all owners as pgs even silent ones Share comp credit - other leases or loans.
  • 13. Conclusion You need to decide for yourself if leasing is right for you . Determine long term equipment needs Dont always believe your business associates, banker, or friends. Use lease payments as cost justification to evaluate equipment purchase.
  • 14. Resources Available Equipment Lease Association : http://www.chooseleasing.org/ http://www.chooseleasing.org/informed/Articles/SmallBusiness.pdf Free credit report - https://www.annualcreditreport.com/cra/index.