If you haven't read the article, 'The Lease You Can Do' we penned for Quick Printing Magazine, it's available here, or you can read it below.
When trying to get you to lease copy or printing equipment, a broker or manufacturer may tell you that leasing frees up badly needed cash for marketing or development efforts. With careful planning that is true, but for an unprepared business owner a lease can be a dreaded monthly payment that is the difference between thriving and closing up shop. Always remember that leases should free up cash flow, not restrict it.
By slowing down your decision making process, you can secure a lease that makes sense for your business. Be sure to take a moment to examine all of the costs before signing. With all lease payment structures, you need to examine the maximum monthly payment you would be required to make and compare it to your expected revenue.
To start, always look at equipment leasing as two separate transactions. For example, you are negotiating for the Xerox DocuTech 6100 that you need and you are deciding how much money you're willing to pay in interest. So you should fight for both—the best gear and the lowest price. All it takes is a little advance work and knowing the right questions to ask.
Always Take an Interest in the Rate
In order to be successful in earning the best interest rate on your copier lease, you need to think big. No matter the size of your company, you need to learn to throw your weight around like a bona fide blue chip.
Most importantly that means not taking the first offer from manufacturers. Get the interest rate in writing as to the percentage and the real cost of leasing a copier directly from the manufacturer. You might be surprised to learn the rates on recently introduced equipment like the Xerox 4590 or Nexpress 9110.
Next, solicit additional offers from equipment leasing companies. Look at your company like a municipality. Send out a Request for Proposals and try to secure at least two bids from financial services corporations. Let everybody know that you're looking around. The numbers you're quoted might change in a hurry.
How's the Service at That Place?
Emergency repairs on a copy machine can be a double hit to your bottom line. With your equipment out of service you can lose valuable time and revenue from jobs that can't be finished. In addition, the cost of hiring a service technician or finding a rush replacement can add up in a hurry. Always know the value of your leased equipment.
Keeping your copier on a service package is standard in most lease agreements. However, you should always know the details of that service, i.e. what is the response time of technicians and when are they available to service your machines. That way you will be prepared to handle any equipment malfunctions without sacrificing profits.
Estimate Copy Volumes
An estimate is by its nature inexact. However, when negotiating a black-and-white copier lease a bad estimate can be very costly. If you underestimate the number of copies you produce many copier leases lock in expensive per-copy charges for overages. Moreover, you'll have added strain on a digital copier which could lead to more downtime or additional repair charges.
If you overestimate you could get whacked with a monthly copying minimum fee hidden in many equipment leases. So you will be paying a monthly fee for a copier that you don't use.
Always ask if there is a minimum copying or per-copy fee. The best alternative may be a flat rate which allows you to control the costs of service and copying.
Look at how payments are structured in order to assess which is most appropriate for the volume of business that you expect in the short and long term.
So now that you know what you want and how much you can afford to pay, how are you going to get approved?
Equipment lessors look at your ability to generate revenue and your current financial health as well as your previous credit history in assessing whether you are a risk worthy candidate. By examining your own company before you offer it up to scrutiny by a dealer you might be able to identify potential areas of weakness.
Order Up
Start with potential customers and orders. Whenever possible, show evidence of contracts that you already have which require the use of type of equipment you want to lease. Advance sales are a major bonus. This has the added benefit of making the first few months of your business a bit more predictable.
Learn From the Past
The financial institution will need to examine your individual credit history and that of your corporation. Consider having partners or a board of directors if your credit history is not as strong as you would like or if your corporation is just starting out. By adding partners with better credit, you can lower your risk rating substantially.
Money Talks
Pledging additional collateral, such as property or holdings, will make your bottom line more attractive to lessors. It shows that you have additional assets and a potential track record of success. Keep in mind that any collateral that you include in a lease is open to creditors if your business venture does fail.
Economies of Scale
If you're upgrading technology at the same time you're purchasing new office furniture, make it the same deal. You can work with an equipment value-added reseller to bundle equipment and peripheral purchases into a single lease. As the size of the deal increases you may be able to negotiate for a more favorable rate or be able to present a more attractive application.
Jonathan Bender is the director of communications for the Bender family of companies which includes JJ Bender, an equipment trader, and the Graphic Savings Group, a financial services company for the graphics industry. He can be reached at jonb@jjbender.com.
