Now that you have chosen to use equipment leasing to help meet the growing needs of your business, follow this guide, taking into account the beginning, during and closing stages of an equipment lease.
BEGINNING
How long are you planning on using your leased equipment? Make sure your equipment lease agreement is the right time frame for your business needs (shorter if the equipment will be out of date quickly and longer if you will be using the equipment regularly.)
Ask your vendor what are your responsibilities under your purchase agreement. Does the quoted price include sales tax, delivery, installation and training?
Contact your insurance agent for coverage. This way if the equipment is damaged or stolen you are protected (required on the equipment lease.).
What happens if your leased equipment breaks down? Do you need a service agreement? Ask your vendor if you have to pay for repairs if they occur (service and maintenance costs cannot be covered in an equipment lease.)
DURING
Paperwork When contacting your Five Point Capital Lease Manager, have the following pieces of information available to expedite the process. Some information may not pertain to your situation.
Have your social security number ready. This is one of the most important pieces of information your equipment lease manager will need before completing your equipment lease application.
Prove your time in business. A business license or tax document will easily show how long your business has been operating.
Provide business ownership details. This will insure that the correct person is signing the equipment lease agreement. All owners who have more than 10% ownership must be listed.
You may need to provide a location lease and financing agreement or utility bill. Your lease manager will need to demonstrate location of business, equipment or jobsite. If you have recently moved, are opening up a new location or your business doesn’t show up in public directories, you may need to provide documentation demonstrating the location of the business.
Business Bank Account information. A business bank account is required to finalize the equipment lease and any fees or payments need to be made from the business bank account.
Tax Liens or Judgments– If you have any past tax liens or judgments, you may be asked to provide proof that they have been released or satisfied. Sometimes the credit bureaus have not updated their information, so providing documentation will help keep the process from being delayed
Show proof of comparable credit. In some cases with larger loan amounts you will simply need to show you have been able to pay off large loans before by providing a lease or loan reference.
CLOSING
When you get your lease documents please be sure to follow all instructions and read carefully to make sure everything is correct.
All documents will need to be signed in black ink and your signature must match your name exactly as it appears on your driver’s license. No white out or cross outs are accepted.
You will need to make sure that there is proof of insurance on your equipment. This could hold up the funding of your equipment lease and delay payment.
Make sure there are sufficient funds in your business checking account for the deposit amount. Bouncing a check could void the deal.
Things to Keep in Mind
Make sure you have quotes from your equipment vendor that include all the cost (sales, tax, installation, delivery and training (if needed))Decide what type of equipment leasing best suits your needs. Fair Market Value or Dollar Buy out. Read our Equipment Lease Type Guide to decide what type of lease financing is best for you.It is important that you choose a lease term (2-5 years) that fits the type of equipment you will be leasing and it is also important to know what monthly payment will fit your budget. You may have to lengthen the term of the equipment lease to enable the monthly payment to fit within your budget. Also with equipment financing it is important that you look at the type of equipment when choosing the term. If it is going to be out of date quickly, you may want to have a shorter term.Recognize that there maybe additional paperwork required to complete the equipment financing and lease agreement. Sometimes information on your credit report needs to be clarified. Your lease manager tries to get all paperwork and information needed but it is common that other documentation needs will arise during the process.If you opted for a Fair Market Value Lease, once your equipment lease term ends you will need to decide whether you want to return your leased equipment or purchase it. Information will be sent to you regarding these steps.Can you pay off the lease at any time? How can you exercise this option and what will be the final cost? As always, consult your tax professional as certain tax implications may apply. It is important to note that an equipment lease is not like a mortgage. Interest is not saved if you pay off the lease. There is no pre-payment penalty. You will, however, be paying the entire cost of the equipment and financing fees when you pay off the equipment lease before the lease term ends.
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