If you wish to enter the hospitality business, then a lease is one of the best financial options you can include as a part of your business. There are many benefits to hospitality equipment leasing like enabling you to obtain equipment without spending too much of your business funds etc. You will be required to pay a small amount every month as lease payments. And your monthly lease payments are determined by a number of factors like – Credit Score: One of the main factors that will determine your monthly lease amount is your credit score. If your credit score is higher, then your payments will be lower. But if your credit score is weak, then your payments will be higher. It is, therefore, important that you have a good credit score when you apply for a lease, or else you will have to pay higher monthly payments. And if your credit score is very weak, then it may be better for you to only apply when you have repaired your credit score. Term Period: The length of the lease period also plays an important role in deciding the monthly payments. Typically, you will only have to pay a lower monthly amount for longer leases, and a higher amount for shorter leases. So if you think that your business is going to be using the equipment for a long period of time, then signing a long term lease will entitle you to lower monthly payments. Type Of Lease: The type of lease you take will also impact your lease payments. Generally, you will be offered two types of leases – a Fair Market Value (FMV) , and a Purchase Option (PO) lease. In an FMV, you will only need to make a lower monthly payment than a PO lease, but you will not own the equipment after the lease period ends. In contrast, you will have to pay a higher monthly amount in a PO lease. But on the positive side, you can own the equipment after the completion of the lease period. So if you do not wish to own the equipment after the end of the lease period, then an FMV lease is the best choice for you since it is cheaper than the PO lease. Experience: Your experience in the industry may also factor in the lease payments. If you have sufficient experience working in the hospitality industry, then you are very likely to get at cheaper monthly payments. But if you are a complete newbie in the field, with zero experience in the industry, then there is a chance that the leasing companies may lease you only at higher rates. Benefits Of Lease In addition to enabling you to start your business without having to spend too much of your capital funds on buying the hospitality equipment, leasing offers many advantages like – You can obtain the equipment without having to provide collateral from your personal assets. When you take a lease on the hospitality equipment, that equipment is considered as the only collateral required. You can pre-pay the lease without having to pay any pre-payment penalties, unlike loans and other funding options. You will have more power to negotiate the payment terms than you would have had with a bank. With a regular financial institution, you would have had to accept the payment terms set by them. It also allows you to secure 100% funding for the equipment. In a loan, you will have had to pay the shipping, transportation and other costs from your own funds. But with this, all such costs are covered and you won’t have to spend any money from your funds. There are no down payment requirements for a lease. At the most, you will be asked to pay a few months’ of payments in advance. That’s it. This is much more beneficial than a loan, where you will be required to make a down payment of 20%-30% of the equipment cost. You should also ensure that you do due diligence on all prospective leasing companies so that you only associate with good, reputed companies and vendors for leasing.
