Financing can be considered as one of the toughest challenges in starting a business. Many successful business owners had to work on a limited budget. Through careful planning and preparation, they were able to grow their businesses from scratch.
One way to minimize the start-up costs and begin the business operations at the soonest possible time is to lease equipment. Purchasing business equipment can eat up a large percentage of your capital and might leave you with very little cash to sustain the operations. Through leasing, you can reserve your available cash for managing the business and obtain all the equipment necessary to operate.
Aside from preserving the business budget, leasing equipment offers other advantages. For one, acquiring a business equipment lease is much easier than acquiring a loan. Due to the greater risks involved in extending business loans, banks and lending companies typically impose strict requirements making it difficult for a start-up business to get an approval.
In fact, even a business that has been in operations for more than 2 years can still find it difficult to get a loan without an impressive business credit history. Most business loan providers will decline your application if you do not have a solid business credit history to back you up.
On the contrary, the application process in acquiring a lease is so much less-complicated. True, some leasing companies require businesses to be at least 2 years in operations but there are special lease programs for start-up and new businesses from zero days to 2 years old. The specific requirements may vary from one lessor to another but you should expect to be asked to submit a business summary, equipment invoice, personal financial statements, and personal income tax returns for the last 2 years.
Leasing equipment is also a good way to establish and build business credit history. Of course, you should make sure that your leasing company reports to a major business credit bureau like Dun & Bradstreet. Register for your D&B number online as soon as your business has officially launched. If your leasing company doesn’t report to D&B it’s a very simple process for you to take the steps and have your lease reported yourself.
Tips For Faster Start-Up Lease Approval
Look for the right leasing company. Keep in mind that not all equipment lease providers offer leasing services for new and start-up businesses. Check the lessor’s requirements before taking any action.
Do not submit multiple applications. Refrain from submitting multiple lease applications to different companies just to see which one will grant approval. Instead, do your research first and submit an application once you are certain that you’ve found the right partner.
Do submit supporting documents. It’s a good idea to provide an executive summary and a well-prepared business plan along with your equipment lease application. Doing so can significantly improve your chance of getting a quick approval.
Do check your personal credit report. As the owner of the business, your personal financial background will be evaluated. Prepare to submit your personal financial documents and income tax returns for the last 2 years. Check your credit report to make sure that there are no errors which could be pulling down your score. If you have credit problems, make sure the leasing company you choose to work with not only have programs for new businesses, but also people with credit problems.
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The New Business Owner’s Guide to Equipment Leasing
Equipment Leasing – Helpful for Start-Up and Growing Businesses