A survey of small businesses by the Equipment Leasing and Finance Association (ELFA) indicates that the top three financing options for acquiring equipment are cash, bank loans, and leasing. Cash is generated through the customer’s operating profits, bank loans are acquired directly through the customer’s bank, and 88% of lease financing is acquired indirectly by the customer through their equipment suppliers finance partners.
Cash is king! As a result, most companies are trying to conserve as much cash as possible for day to day operations as well as for any unforeseen needs.
Banks loans are more difficult to obtain as banks continue to tighten their credit requirements. Furthermore, many banks have added yield enhancements and they have also strengthened their restrictive loan covenants, thereby making it more difficult for companies to obtain additional funding in the future. Some examples of yield enhancements include the requirement for larger down payments, compensating balances, and up front fees.
Conversely, lease financing offered through equipment vendors is readily available to fund equipment acquisitions. The ELFA survey indicates that approximately 70% of small businesses are currently using leasing as a source of funds and 40% have used leasing in the past. Moreover, office equipment and computers represent 67% of the equipment type financed through leasing.
Some of the top perceived benefits of leasing according to the survey are:
• The ability to have the latest equipment — No down payment required. Finance 100% of the equipment cost. Low monthly payments.
• Consistent expenses in budget planning — Fixed monthly payments and no hidden monthly fees.
• Convenience — Quick credit decisions and dramatic reduction in paper work. Simple one page application and lease contract.
• Customized Solutions — Level payments, step up and step down payments, seasonal payments, 90 day no pay programs, various end of term options, soft cost financing, etc.
We continue to improve our funding programs to insure that they are competitive, simple and convenient—as research suggests they should be. We will also continue to provide you information on how to use leasing as a tool to increase sales.
Like our funding programs, our primary goal is simple—to help you sell more product. The fact that almost 70% of small businesses are using leasing to finance their equipment acquisitions, dictates that every sale proposal should be combined with a lease financing alternative in order to close more sales.
