Commercial equipment leasing through a non-major lending institution has more than enough advantages to merit your attention. Major lending institutions, such as banks, are very diffucult to obtain a loan from since they only accept businesses with the best credit scores and track records. Luckily there are many other funding sources to consider in your search for funding.
What Your Banker May Not Tell You:
Bank Leasing uses up your bank credit line. Many business people are often surprised to find the available cash they’ve been counting on through their bank credit line is reduced by the amount of equipment leases they’ve done with the bank’s leasing department. Your bank has a credit limit that they’ll extend to you and typically whatever you do with them counts towards both cash borrowing and/or term leasing.
Compensating balances increase interest cost. Many businesses are lured by seemingly unbeatable rates to bank leasing or financing plans as part of an overall banking plan. But if any part of that plan includes minimum or compensating balances in any other account, it may not be as good as it seems. On a $50,000 loan at 8% over 36 months which requires just $2,000 to be kept in any related account, that 8 percent interest rate works out to be more than 10 percent!