What is Commercial Leasing?

Commercial leasing allows a company to rent equipment and facilities without having to purchase them outright. Leasing may offer substantial financial benefits because it is less capital-intensive and offers more flexibility, allowing a company to make short-term location and equipment decisions that can be easily changed at the end of the lease period. Commercial leasing may also provide different tax and financial reporting treatment when compared to ordinary business expenses.

Why is Commercial Leasing important?

Commercial leasing helps businesses save money by being able to rent equipment rather than buying it outright. Often, the payment for the monthly or annual lease is less than a loan payment would be. In addition, when you rent equipment rather than buy it, you can save money by not having to pay for repairs.

When you lease equipment, you will also be able to upgrade your equipment at the end of the term of the lease, which helps to ensure that you have the latest tools available on the market. On the contrary, if you purchase equipment, you will spend a substantial amount of money buying new equipment as technologies improve on a regular basis.

By leasing equipment, you will also help to ensure that your company does not have depreciating assets in its possession, which can make financial management simpler than if you had to calculate the cost and estimated cost of the depreciating asset on an annual basis.

How should a vendor for Commercial Leasing be selected?

There are commercial leasing vendors for just about every piece of office or business-related equipment, including photo copiers, computers, office furniture, office space, and much more.

In order for find the right commercial leasing vendor for your needs, consider the following:

• What Do You Need? - Assess what pieces of equipment you will need for your business. Do you need furniture? Do you need a photocopier? Computers? Find a company that can provide more than one item. After you determine what items you need, you can look for a company that may provide a discount for multiple items.

• Ask for Bulk Discounts - Many companies will offer discounts if you lease multiple items from them, such as an entire office suite of furniture.

• Space Leasing - Many office space facilities will also lease items such as furniture, a copier, and other equipment. If you are moving into an office space, ask what items come with the space. If you are looking for space, you may want to include leased items in your wish-list.

• Estimate Purchase Versus Lease - Some items may be worthwhile to purchase, such as computers. Remember, you will have to pay taxes on whatever items you purchase - not only when you purchase them, but also on an annual basis for as long as you have those items.

• Does the Vendor Have a Solid Track-Record? Make sure to check the Better Business Bureau records for information about a commercial leasing company before you sign on the dotted line. Make sure that there are not many complaints filed against the company. A Google search may also help to uncover negative feedback about a company before you commit to a contract.

• Up-Front Fees - Many commercial leasing companies have up-front fees for their services. Ask about any and all fees associated with each lease. Remember, some items may have different fees than others. For example, you may pay a higher depreciated asset fee for a computer than you would for an office chair because of the rate of depreciation.

• On-Going Fees - What are the monthly fees to lease each item? How do these fees compare with comparable items that you could lease from other companies?

• Early Termination Fees - Make sure that you understand the early termination policy. If you choose to leave your current office space, will you be able to take leased items with you? Will you have to pay an early termination fee?

• Lease-to-Own - Some companies allow businesses to lease-to-own items so that they can purchase the items at a lesser rate at the end of the period of the lease. If you decide that you want to hang onto certain items that you have been using, such as office equipment, you may wish to have the option of purchasing them once the lease term is over.

• Damage and Replacement Fees - What happens if you drop a leased computer and it breaks; who covers the cost to replace or repair the computer? Will you be charged extra fees for scratches on a leased filing cabinet? Make sure you understand what damages are not covered under the normal wear and tear policy so that you are not stuck with hefty bills at the end of your lease term.

Additional Resources:

• A commercial leasing guide from the Small Business Administration Resource Center:

http://www.sba.gov/smallbusinessplanner/start/pickalocation/SERV_BP_CLEASE.html