Equipment financing plays a key role in arranging the funds required for setting up a business. Whatever remains the size of the start-up, the business owners look forward to taking advantage of the most modern equipment in the market.
Be it in the aviation industry or pharmaceutical firms, well, the fact is that the devices or equipment involved are pretty expensive. Thus, here investors should go for business equipment financing. They can also go for leasing to avoid the outflow of a lump sum amount, which they can use for other purposes in their growing business.
Finance and Lease
Financing and leasing are two accounting methods to raise funds for business equipment. Financing involves the user purchasing the asset. On the other side, leasing involves the lessor buying the asset, and that too on behalf of the lessee. In both cases, the user must pay repayments to the lessor or financier.
Leases get further subdivided into two types: The first one is termed as financing lease, and the second one is the operating lease.
What is a Financing Lease?
Well, financing lease is a long-term contract wherein the asset ownership lies with the lessee. At the end of the agreement, the lessee can choose between selling the asset or returning it to the lessor.
What is an Operating Lease?
An operating lease is the opposite of the financing lease, as far as the owner is concerned. In an operating lease, the lessor retains the asset rights. The lessee uses the asset and pays the lessor in the form of monthly rentals. At the end of the contract, which is usually shorter, the lessee must return the asset to the lessor.
What is Sale and Leaseback?
A sale and leaseback agreement allows the user of an asset to keep using it for more extended periods without owning the asset. The original user of the asset sells it to another buyer. The new buyer then becomes the lessor, and the actual user becomes the lessee of the asset. So, the original user takes the asset back on a lease and uses it for longer durations without owning the asset.
The sale and leaseback method was found to be used maximum for business equipment. It is done as the business owners want to raise funds they had spent on purchasing the asset. But, at the same time, they cannot sell the assets on their own. Well, because its purpose remains, in the business growth. So, the business owners choose the sale and leaseback method.
Another advantage of this agreement compared to taking loans to raise funds is that a loan is a debt for the business balance sheet, which can be a liability at the end of a given fiscal year. The sale and leaseback method, on the other hand, straightway adds to the asset value of the business, which is a positive step.
The healthcare sector has witnessed tremendous achievements in the past few decades. The latest instruments have been introduced in healthcare centres to treat patients using the most advanced technologies. But, these medical instruments, for example MRI, EEG, X-Ray machines, ECG, etc., require large amounts of investment and maintenance costs.
The medical equipment used in many hospitals and other healthcare centres must be of the finest quality. The administrators, in no way, can remain careless about the efficiency of these machines. The reason is that it involves the lives of the patients. At times, the equipment becomes the most crucial part of the treatment, and the doctors take urgent action based on its response.
However, medical equipment gets upgraded over the years, and newer versions got introduced in the industry. Thus, two factors play simultaneously: one, the medical equipment is indispensable, and two, it should be replaced by their newer versions periodically.
Keeping the above factors in mind, the medical business owners opt for medical equipment leasing. This way, they pay lower costs for the machines. Also, they do not need to own the equipment, as they would soon have to replace them with the higher versions.
Best Business Equipment Financing
As per the sources on the Net, there are many equipment finance companies that have a trained team of guarantors as well as mentors.
The business owners can take the guidance and service of these financiers. It will help them in easing their journey of starting a business, and also in financing their valuable equipment.
One of the notable business equipment finance companies is the ‘First National Capital’.
It provides equipment financing in several business areas.
Some examples are aviation, construction equipment, healthcare, food industry, manufacturing units, and the energy sector. Their team for aviation finance has experienced and knowledgeable advisors and underwriters who guide businessmen in the industry of airline financing.
The experts provide effective solutions to the prevalent challenges that the businessmen face at the beginning of their venture. The team shows them the right ways to obtain the best business equipment finance based on their financial requirements. The firm has already provided a huge fund to the business aircraft industry.