If you’re starting a company that offers machinery and equipment which other businesses can lease, then you will most certainly need a fair amount of capital. Other businesses lease equipment because for the most part these things cost a lot of money to buy. As a machinery leasing company, you can buy these equipment in bulk so you can enjoy significantly lower prices than those offered at retail.
The Need for Working Capital
But even after your initial purchases, you may find that you still need working capital to run your leasing company.
- You’ll need a place of business for your office, and you need to pay rent and utilities.
- Your company will need to meet payroll on a regular basis, and that’s an expense that you cannot avoid.
- You’ll also need adequate space for all your equipment so they can be protected from weather damage. These warehouses will cost you money.
- You may also be required to get insurance. You may need liability insurance to provide coverage should someone get hurt through the use of your equipment.
- You’ll also be responsible for the maintenance of the equipment. You’ll need to hire technicians to oversee maintenance and repairs. In addition, you need proper tools for your technicians, along with spare parts to replace broken machinery parts.
- Your customers may need more types of machinery which you have to purchase. In addition, some types of machinery may use additional or extra attachments and accessories which you will also need to buy.
As a leasing company, it would be best if you and your clients are clear regarding the fine print of the leasing contract. Both parties must agree as to the payment and the schedule, who deals with the maintenance, and whether leases can be terminated early.
Procuring Working Capital Loans
If your working capital is insufficient, you may find your business unnecessarily restricted and unable to grow. Because of this, you may want to consider securing a loan to add an infusion of cash for your working capital.
For example, you can get a merchant cash advance so you can buy more equipment that other businesses can lease. Your funding partner may then get a percentage of the fees paid by your customers until the advance and the premium for the advance are all paid up.
You may also get a form of inventory financing, or perhaps a loan with your equipment as collateral. The amount you can get will depend entirely on the value of our equipment. You may even use property and real estate, such as the land and the building housing your equipment, as security for the working capital loan. However, if you’re unable to meet the payment, your equipment or your property may be seized to cover your debt.
There’s a lot of money to be made by offering equipment that other businesses can lease. Just make sure you have the working capital you need so that your own company can run smoothly.