Using A Lease To Operate A Venture - Accounting jobs

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Since I have a passion for the finance industry and I'm currently receiving my degree in the field, from time to time I will try to present an article with some financing alternatives or techniques that may help assist young entrepreneurs in their pursuits for greatness.

One financing technique that has grown massively in the past ten years is equipment leasing. Equipment leasing basically allows an entrepreneur to receive equipment for an extended period of time without having to pay large expenses all at once.

For instance say you’re starting an I.T. business and you find out that in order to run your business properly your going to need about $15,000 in software and computer equipment.

In a situation like this what are your options? You can pay these expenses up front from some sort of savings that you have accumulated, you can draw out a loan from a traditional banking institution, or borrow the funds from another more contemporary source rather it be angel investors, potential business partners, or venture capitalist.

While all these options may seem like logical sources, many of them are hesitant to work with entrepreneurs that are not well established with either good bureau credit ratings, B & D reports, or other assets that they can use as collateral.

Now an equipment leasing firm would basically purchase the equipment then lease it back to you which would allow you the possibility of receiving the $15,000 worth of equipment and paying monthly payments. Instead of using your personal assets as collateral they use the actual equipment that is being leased as collateral, so if you don't make payments they can seize the property.

Leasing companies can tailor leasing programs to fit your current needs rather it be negotiating monthly installment amounts, or creating seasonal leases for companies who experience more business or only work certain months out of the year like construction companies.

So what happens when your lease runs out? Well that would be up to you and what kind of plan you decide to agree upon with the leasing firm. There are leases that will allow you to keep the property at the end of the term, these leases generally are much more expensive because basically you’re paying for the property the leasing company is just acting as the financier.

Other leases will allow you the option of returning the equipment to the lease company and receiving new equipment or simply walking away. Really the sky is the limit on what type of lease plan you and the company design, just don't be afraid to negotiate.

Let me leave you on a cautious note, be VERY, VERY careful who your dealing with in this industry! Like any large industry when people find out there's a buck that can be made the scammers come out of the woodworks.

In recent years there has been a lot of fraudulent activity going on in this industry, mainly in taking large deposit amounts from customers for thousands of dollars and changing the terms of the agreement, so when the customer doesn't agree they will say that the deposit is non-refundable.

Also many firms pack on thousands of dollars in dummy fees and expenses to make profits on the front end and back end, so be careful and take your time when putting a deal together because this really is serious business! So remember to always do your homework, read contracts carefully, and like always seek legal counsel from experts, which really is money well spent!