Leasing large or expensive equipment is a flexible option for businesses of all sizes, but it can be particularly beneficial for those just getting started. Leases provide an alternative solution for small or new businesses that are unable to secure traditional lending to finance a lift truck or don’t have the working capital to buy them out right. Plus, it frees up cash flow and resources, allowing operations to focus on getting their new venture off the ground.
“It just helps them get started in the beginning,” says Chris Griffin, director of EQFinance and Leasing at Equipment Depot. “You’re not selling a lot; you’re not manufacturing a lot of products, so you need that financing to get that equipment going and get your business up and running. You don’t have a lot of cash coming in yet, so that’s where leasing can be hugely beneficial to kind of move some of that cost down the road,” Griffin adds.
Leasing also allows small and large businesses to focus on the core of their business without worrying about having to manage a fleet of forklifts, all while creating very predictable cash flow streams for their business. Instead of one large expense all at once, businesses can spread the cost into a monthly payment over several years.
“That predictability really helps companies understand their cash flow streams, their expense levels, their profit margins, and ultimately, what their pricing needs to be,” says Griffin.
About 60% to 70% of the forklift business is financed in some way. Whether that’s a lease or a loan, using debt to finance long-term assets such as lift trucks allows businesses to leverage cash for something that creates higher return and grows their business.
“You’re going to have [your lift truck] somewhere between three and eight years, depending on use,” says Griffin. “Financing allows you to match payment streams or cash flows over the term of that life, so that you’re not taking that hit all at the beginning.”
Because leases are securitized debt, they also often come with a lower interest rate and can be subsidized by the manufacturer.
“Like a home loan, securitized debt is at a lower interest rate than a general working capital line of credit. By being able to use that securitized debt attached to the forklifts, customers may be able to lower their interest burden on the entire company and save some money compared to just using cash or their general line of credit to fund those forklifts—or they can use that money to invest in networking capital or inventory to grow their business.” explains Griffin
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