Financing exercise equipment is one of the ways that fitness centers acquire equipment, but do you know the many reasons why your competitors prefer lease financing?
Fitness centers are motivated to choose lease financing by the tax advantages but that is not the only reason. Over the years, many people thought that leasing was for companies that couldn’t afford to make a cash purchase on equipment. It has however become obvious that even government institutions and large companies prefer to lease their equipment. Some of the other factors that make them choose to lease equipment are listed below.
Reasons For Lease Financing Exercise Equipment
Some of the fitness centers that choose to lease finance their exercise equipment do so because they do not want to go through the process of applying for a conventional loan. It is tedious and takes too long to be approved. Sometimes they do not even get approved for a loan. The process of applying for a lease is very simple and does not take up a lot of time. It is easier to compare quotes from different leasing companies over the internet and a lease application can also be done online. Leases usually are approved within 24hours so you can start business as soon as possible.
Financing exercise equipment does not require you to have a perfect credit score. This is one of the reasons that your competitors would rather go to a leasing company than go to a bank or any other institution to ask for a loan. It is nearly impossible to be approved for a loan when you have a stained credit score because banks consider you to be a high-risk client. With leasing, you can still be approved for a lease even with a damaged credit score.
Your competitors may also prefer lease financing exercise equipment because it is a sure way of not damaging their credit score. When you take a loan from a bank and through unfortunate circumstances, you are unable to repay the loan, your credit score will automatically go down. On the other hand, when you apply for a lease and you are unable to pay monthly lease payments, the lessor will simply take back the equipment and leave your credit score untainted. More importantly, you can easily increase your credit score by making monthly payments for the entire lease period.
Another thing that your competitors have realized about lease financing exercise equipment is the fact that they do not need collateral to acquire equipment. The only collateral they need is the equipment leased to them. What’s more is that they can acquire the equipment at the end of the lease term through a buy-out option. They can decide to purchase the equipment at $1, at fair market value or at 10% the initial cost of the equipment. This of course depends on the type of lease agreement they get into and the terms of the lease.
Your competitors can choose their own rates and that is why they choose to lease their exercise equipment. Yes, they can choose their own rates. With a good credit score, they have the advantageous position of bargaining for a better rate with their lessor. They can also choose their own rates by comparing them between different companies.
Does This Mean That Lease Financing Exercise Equipment Is Risk Free?
No, it does not. Like every other method of financing exercise equipment, leasing has its disadvantages. Lease financing does have its perks but you may end up signing an agreement that forces you to pay for equipment that you are not even using. To avoid this, avoid leases that last for more than two years especially if you plan on leasing equipment that becomes obsolete very fast.
Leasing can cost more money in the long run. To calculate how much you will pay by the end of your lease term, multiply your monthly payments by the number of months you agreed to in your lease agreement. If the total cost is higher than the initial cost of the equipment, then you should consider making a cash purchase. Alternatively, you can consider signing a lease-to-own agreement where at the end of the lease, you have the option of buying the equipment.
In summary, your competitors prefer leasing because of the many reasons mentioned above. Speak to a trusted accountant or attorney so that they can tell you what type of lease is suitable for your gym.
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