For businesses dealing with equipment, micro-ticket leasing can provide significant advantages to the enterprise. Because it reduces the demand on a business’s cash flow, it need not invest in high-tech equipment that may quickly become obsolescent. In addition, it leaves their bank credit options open. This is the reason leasing is one of the fastest growing methods of financing equipment in the market today. Therefore, it is no surprise, that about 80% of all US businesses today acquire a portion of their equipment on lease. Leasing is an option not only for small family businesses; even Fortune 500 companies use it.
With micro-ticket leasing, a business is not required to pay upfront for the equipment it is leasing. This keeps the business’s working capital free for use for other business uses, such as maintaining critical inventory levels. Waiting time for the required equipment is almost zero, as the processing time required is very low. Moreover, any startup or fairly new business, with no or little credit or business history, may be eligible for a micro-ticket lease. Even for businesses that have exhausted their business credit line with the banks, micro-ticket leasing may provide an avenue for continuing the business.
So, how does micro-ticket leasing really work? This leasing is available for any hardware or equipment costing between $1,000 and $10,000. If the total sale is less than $100K, the purchaser may not need to show any financial information while submitting the application. Unlike standard bank loans, purchasers with business history of less than two years are readily approved. Approval is usually obtained within one or two working days, with the purchaser receiving a term sheet that can be reviewed and, then, accepted or declined. The major benefit being, micro-ticket leasing companies can say yes, even when banks might have refused the transaction.
What does the customer get out of micro-ticket leasing? The total amount that the customer has to pay for the equipment may be lower than with conventional leasing and the monthly rental payments will quite manageable by any business. Customarily, conventional financing may require a down payment of at least 20%. A micro-ticket leasing company may only require the first month’s payment in advance. Since a bank credit line is not related to micro-ticket leasing, the lease payments have no effect on that facility. The customer’s borrowing power from its bank remains unaffected and may be used in other business opportunities. Also, as the customer makes the lease payments, its credit rating improves. Upgrading equipment becomes simpler as it ages. Old equipment can be readily upgraded to newer versions. In addition, lease payments may be expensed for income tax purposes and this may enhance a company’s after-tax cash flow. Usually the lease payments are in equal monthly installments, which protect against market fluctuations in interest rates.
Most new businesses face the problems of limited cash flow, but still need equipment to run the operation. With micro-ticket leasing, these businesses are able to acquire new equipment, without the extensive capital investment, resulting in major cash-flow advantages. The sales and profitability increases that might be anticipated from point-of-sale or other customer-enhancing equipment may very well exceed the cost of the lease of the equipment as well.