Business Angle: Benefits of Lease Financing
Professional Surveyor Magazine - May 2012
by Ernest Leal and Robert Shafer
In order to stay competitive in today’s market, land surveyors are striving to stay more advanced than ever in technology and capabilities. Whether you are a start-up surveyor or a long-established surveying company, you need the right tools for the job at hand. Having the right tools opens new opportunities and can give you a competitive edge to compete in today’s market.
While the price tag on surveying equipment can be quite high, many surveying professionals are acquiring the equipment they need with affordable financing plans. We’re both regional managers at Balboa Capital
and have more than 40 years of combined experience with a primary focus in providing financing to surveyors, engineers, and machine control users. Here we share insights and recommendations on financing for surveyors.
PSM: Surveying businesses are challenged to enter new markets that often require innovative technology: 3D scanners, GPS systems, robotic total stations, etc. They are also challenged by the tight economy and the need to preserve cash. How can lease financing help them do this?
Lease financing enables the surveyor to structure a finance program that will match the firm’s cash flow, and leases can be structured with seasonal payments or even smaller payments for the first year, giving the customer time to generate revenue with the equipment.
Equipment leasing also allows the end user to acquire the equipment they need to grow with little or no money out of pocket. Financial companies with experience catering to surveyors and machine control companies have loans tailored to meet specific needs and budgets.
PSM: What would be the advantages of using a finance company to make this acquisition as opposed to leasing or financing from an equipment reseller?
Most resellers will offer terms of only 30-60-90 days; a handful of resellers will carry their own paper for longer periods, but the upfront costs and rate that they charge may be substantially higher than that of a financial institution.
The majority of resellers that are offering in-house financing require a substantial down payment, limited terms, and higher-than-average monthly payments. Financial institutions are typically brand neutral, giving you the ability to bundle multiple brands of equipment into a single financing solution. A financial institution familiar with the survey and machine control industry will offer little or no money down, longer terms, and a competitive rate.
PSM: Markets and technologies are evolving rapidly. What are the options for addressing these issues with geospatial technology equipment acquisition?
Equipment leasing protects against obsolescence. At the pace technology is advancing, using dated equipment can slow the growth of any surveying business. In fact, outdated equipment may drive down productivity and can actually be very costly to maintain. Most finance companies allow the freedom to upgrade or add equipment as their needs change.
This means that the customer can return equipment and replace it with a new piece with better technology, or they can even add on to the existing lease as their needs change and the company grows.
PSM: What recommendations can you give us on financial solutions for smaller land surveying firms?
Find a monthly payment that you can afford. The equipment will pay for itself over the duration of the lease and ultimately generate revenue far beyond its original cost.
I notice a lot of small firms acquiring equipment using their personal credit cards or lines of credit. What some companies don’t realize is that these types of acquisitions show up on their personal credit as a debt. When you finance equipment, whether it is a lease or a loan, the debt shows up on the business credit and not on them personally. This is very important when you’re looking to personally acquire property, vehicles, etc. Keeping your business and personal obligations separate is essential in building a long-term business.
PSM: Any advice for start-up business financing for land surveyors?
There are a select few lenders who will provide financing for start-up survey businesses. The key to acquiring equipment as a start-up is that you must be licensed, have good credit, and have some capital to fall back on when business is slow.
Financing firms that understand this industry and have programs in place to help may require a down payment and that the principal have good personal credit as well.
It is important to ask the right questions when choosing a financing resource. Here are some of the questions that you should be asking and why.
Can I include software, installation, delivery, and used equipment?
Why ask? Some finance institutions will allow finance only for hardware and new survey gear.
Will this show up as a debt on my personal credit?
Try to keep your business and personal obligations separate.
What happens at the end of the term?
Some companies will offer a lower payment up front but have a high buyout at the end of the term.
Is this acquisition tax deductible?
A portion of your monthly payment may be tax deductible; consult with your tax advisor.
How quickly can I get approved?
Time is of the essence. Most distributors need at the very least an approval before they will order or deliver the equipment.
Ernest Leal and Robert Shafer are regional managers at Balboa Capital. Balboa Capital is one of the largest independent financing companies in the United States with capabilities including equipment leasing, commercial financing, vendor programs, franchise financing, and working capital solutions. Find more about Balboa Capital by visiting www.balboacapital.com.
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