Many business owners dream of being able to finance new equipment without going to the bank to request for a loan. The solution lies in small ticket leasing.
Small ticket leasing is one of the best solutions for businesses that want to outfit their growth with new furniture, copiers, computers, etc. without requesting the bank or any other financial institution for financing. It eliminates the hassle of going through a long tedious process of getting financing and the time spent waiting for an approval. Applying for a lease is easy and you can get approved within a few hours.
When compared to direct purchase, a small ticket lease is much cheaper. You don’t need to have large sums of cash up front and you can still own the equipment at the end of the lease by signing a lease-to-own agreement. Rather than laying out large sums of money to pay for equipment, you can pay in small installments and preserve your capital. Below are some more reasons why small ticket leasing could be for your company.
Reasons You Should Consider Small Ticket Leasing
Small ticket leases are popular among financing and leasing companies because they are easy to create, process and approve. They make diversifying lease portfolios a little easier and lend themselves to credit scoring. Plus they are high in demand.
Small ticket leases are created for equipment worth less than $100, 000 but some companies can go as high as $200, 000. Most of the leases do not require you to produce your company’s financial statements but they can ask you to provide personal guarantees from you and your business partners. From there, they will process your application using credit scoring models.
You can use small ticket leasing to obtain a variety of equipment. You can even include soft costs and software. Lease terms for these leases typically last between 36-72 months.
The lease contracts are made up of only one or two pages at most. One disadvantage that you might face when applying for small ticket leasing is that many equipment leasing companies don’t entertain negotiations or making changes on the lease contract. Because this is a relatively low margin, high volume business, leasing companies find it a waste of money to spend time negotiating such a transaction.
Since the early 1990s, various credit models have been used to process small ticket leases. The first credit scoring models were invented by a credit scoring service, Fair Isaac and Company, in the 1980s.
They used statistics to determine personal credit behavior of business owners and used it to predict their business credit behavior. In short, they figured that a business man who paid his bills on time was likely to also pay his company bills on time.
Many equipment leasing companies use the following factors to determine lease transactions:
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- How long the company has been in business
- The size of the company
- The industry
- Payment history
- Net worth of the business
- Any recent bankruptcies, judgments or agency collections.
If you are a “high risk” customer, some small ticket leasing companies have programs that cater to people with poor credit scores. You should, however, be prepared to pay higher rates and you might even have to agree to terms that are less attractive. You might also come across other leasing companies that may ask you to provide outside guarantees or additional collateral.
How To Improve Your Chances Of Getting Approved For Small Ticket Leases
The following are a few steps that you can take:
- Pay your bills on time and consistently
- Settle outstanding judgments and liens
- Pay all back taxes
- To help eliminate the possibility of paying slow, consider setting up an automatic account debiting with your lessor
- Settle with any suppliers to eliminate supplier disputes.
A small ticket lease can be a great source of alternative financing for your business. Not only can it be processed quickly but it is also convenient. Many equipment suppliers either offer this form of financing themselves or they do it through small ticket leasing companies. You should consider taking advantage of this form of financing quickly to help you stay relevant in a competitive environment.
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