As the name implies, equipment leasing is the term for what happens when a business leases a piece of equipment or machinery, rather than buying it. When this happens, the equipment is on loan to the business. The business uses it for the duration of the lease period and then returns the item unless the lease is extended. Leasing equipment is a great option for business owners who are just starting, low on funds, or who need to upgrade equipment regularly.

What Businesses Can Lease Equipment?

Legally speaking, any business that can afford the leasing costs can lease equipment. This includes both businesses that are just starting and small family-owned businesses. However, individual leasing companies may have their own rules as to who they will lease to. Business owners should make sure to check with the company he or she plans on using before placing an order.

Is a Good Credit Score Required?

No legal or standard credit score number is required to lease equipment. Of course, individual leasing companies can decide whether or not they will require an individual or business to have a certain credit score to lease. Individuals or businesses with lower credit scores may have a harder time finding a leasing company. They may also face higher monthly payments because of their low credit score.

Is Paperwork Needed?

With any equipment lease, some paperwork will be required. The necessary documents vary between companies. Usually, both parties (the leasing company and the person/business leasing the equipment) will need to fill out a lease agreement. This paperwork will set the terms for the lease, including the item(s) being leased, the monthly lease payment, and the length of the equipment lease.

Some leasing companies may require more paperwork. This may include (and is not limited to) previous tax returns, recent financial statements, credit score reports, and a lease proposal. A lease proposal will usually include details on what the leaser’s business does and what it will use the equipment for/why they need to equipment. The exact details will vary between leasing companies.

Equipment leasing is a great option for businesses who need equipment, but don’t have the funds to pay for the entire price of the equipment or who do not want to take out a loan to buy the equipment. It is also a great option if a business owner knows he or she would need to upgrade the equipment often.