The rise of venture leasing and lending has created an opportunity for sophisticated entrepreneurs to gain a competitive advantage. Savvy entrepreneurs are using venture leases and loans to generate millions of dollars for shareholders by leveraging existing venture capital. They have discovered ways to use this flexible financing as a tool to build enterprise value between equity rounds and to leapfrog less sophisticated competitors.

Venture leases and loans are usually asset-based, financing arrangements. These financings are available to qualified pre-profit, early-stage companies funded by venture capital investors. Start-ups need equipment and working capital to help them execute their business plans and to reach profitability. Venture lenders and lessors provide financing to these firms to help them acquire computers, lab and test equipment, production equipment, phone systems and other needed business equipment.

These specialty financing firms may also provide financing for working capital in the form of accounts receivable and/or inventory loans. Start-ups that qualify usually have promising business prospects, well-defined business plans and have raised more than $ 5 million in venture capital from reputable venture capitalists.

How are these savvy entrepreneurs using venture leases and loans to boost shareholder value and to gain an edge on the competition? Here are some of the ways:

1. To stretch equity capital and to increase shareholder value between equity rounds. By using venture leases and loans, entrepreneurs can forestall going out for more equity while they continue to build and increase the value of their companies.

2. Use of loans and leases instead of internal cash helps to stem negative cash flow. Most start-ups are faced with negative cash flow until revenues build sufficiently to cover costs. Using limited internal cash for equipment purchases, to invest in inventory or for accounts receivable is not wise, if there are better options.

3. To protect working capital. Purchases of intermediate-term assets with internal cash will remove those funds from working capital. Use of venture leases and loans helps to keep the pressure off of working capital as the cost of these assets gets spread over an extended period.

4. To supplement other capital sources. Venture leases and loans supplement equity capital, mortgage financing and other financing available to start-ups.

5. To liberate cash from equipment, accounts receivable and inventory already financed internally. By doing a sale-leaseback, the start-up can liberate cash from equipment already owned. Likewise, the start-up can finance inventory and accounts receivable that have been funded internally by using a venture loan.

6. To bridge-finance equity transactions. Occasionally, start-ups are able to obtain short-term loans to bridge upcoming equity transactions. These loans are usually well secured by all-asset liens against these companies and are generally available for short time frames. Most venture lenders who provide this type of financing require equity kickers in the form of warrants to purchase stock in the start-ups or stock issued directly to them by the start-ups.

7. To hedge against rapidly depreciating equipment. Venture leases can be structured as fair-market-value leases. These leases usually allow the lessees to renew the leases at fair-market-value renewal rates, to purchase the equipment at fair-market-value purchase prices, or to return the equipment to the lessors at the end of the leases. The return option allows the start-ups to conveniently dispose of obsolete or unneeded equipment.

8. To replace venture capital. Start-ups are using loans in the form of subordinate debt as a substitute for additional equity rounds. These loans can be collateralized or unsecured and can be used for many of the same purposes as equity funding – to continue product development, to add key personnel, to expand marketing and to support sales efforts. Venture lenders generally charge a premium rate for these loans and require sizeable equity kickers in the form of warrants or ownership shares in the start-ups. These loans are generally cheaper than equity financing and may amortize faster.

9. To spread equipment cost over the productive life of the equipment. By being able to spread the cost of the equipment over an extended period, start-ups can get productivity out of these assets while they pay. Paying for the assets out of internal cash has just the opposite effect.

10. To quickly build out infrastructure to allow all employees to be more productive sooner. Venture leasing and lending allow start-ups to add computers, phone systems, networking equipment, software and other business essentials quickly. Employees can be more productive sooner and benchmarks can be reached faster.

Using venture leases and loans is a smart choice for savvy entrepreneurs. It allows them to build substantial equity value with minimal dilution. These arrangements usually do not require board representation or loss of management control. Start-ups are able to add needed equipment and finance working capital with lots of flexibility. Additionally, these forms of financing are significantly cheaper than the likely alternative, more venture capital financing. Savvy entrepreneurs have discovered these advantages and are using them to put their firms ahead of the pack.

Whether leasing is advantageous or not will depend on your particular financial situation, on your needs as a driver, as a tax payer and eventually as an owner. By leasing a car you agree to a series of terms that you should be well aware of before even considering undertaking a leasing contract. This is due to the fact that leasing is only advisable under the right circumstances. Otherwise, compared to auto loans leasing is far more expensive on the long run. Thus, you’d better analyze your situation carefully prior to deciding what to do.

Car Leasing Explained

When you lease, the financial institution is the proprietor of the vehicle and remains proprietor of the vehicle till the car is finally purchased. During the leasing contract you get to drive the vehicle and use it with some restrictions (according to the leasing contract). The limitations are similar to those imposed for the ones that rent vehicles and basically depend on the financial institution stipulations (for instance, there are usually certain mileage-per-month ratios).

In exchange for using the vehicle, the applicant has to pay a monthly installment that is normally just a bit higher than a rent payment. Eventually, the lease taker is entitled to purchase the vehicle and in that case, the monthly payments are considered as part of the payment. Thus, the applicant has only to make a lump payment at the end of the leasing term to keep the vehicle or else, he returns the car, renews the contract or exchanges the car for another vehicle.

Benefits of Leasing Over Auto Loans

Leasing provides several benefits that makes this financial transaction more advantageous than purchasing a car with an auto loan under the right circumstances. For instance, the payments’ amount is significantly lower than the loan installments and only a bit higher than renting.

Moreover, since the car remains property of the financial institution, there are tax benefits too. Part of the payments of your leasing contract can be deducted from your tax presentations. And last, but not means least, getting approved for leasing is far simpler than qualifying for a car loan. There are not harsh credit requirements for approval. You’ll only need to show proof of your ability to afford the monthly payments of the leasing contract.

The Right Time For a Leasing Contract

When is leasing advantageous? There is no single answer to this question. If you lack certainty in your financial life, if you don’t know what you are going to earn then next semester or year, you won’t commit to a loan for purchasing a car that you might lose due to your lack of ability to repay the loan. Leasing provides more affordable payments and you can start saving as much as you can for the final lump payment if you want to keep the car.

Employee Leasing is not a totally new concept. It has been tried and proven by some of today's leaders and most profitable companies. It can help to stabilize your costs and insulate you from unexpected increases, which can send your profit margins tumbling.

Employee leasing can provide "top of the line" benefits packages with a number of employee health insurance options, complete payroll services, personalized reporting and administrative services.

Most employee leasing companies maintain a "minimal" administrative, sales and marketing staff in order to keep overall costs down, and in turn, "employee leasing costs" to their clients.

Employee leasing is a cost-effective convenience for any small business owner. The reductions in cost are made possible through volume discounts by pooling your company's employees together for worker's compensation, health, dental, vision and life insurance benefits, state taxes, S.U.T.A. taxes, federal taxes, etc. Paperwork hassle and time consuming follow up are reduced, and sometimes eliminated, because the employee leasing company does the work for them. All payroll related taxes, filings and reports are also handled by the employee leasing company, leaving the business owner free to take care of the things he or she went into business for... Making A Profit! And remember, leasing your employees takes care of most of the human resource paperwork, thereby allowing the owner to reduce, or possibly eliminate human resource staffing, adding up to more savings!

Single-payment car leases can save you some money, but probably not as much as you might think. Furthermore, there are some disadvantages that are worth noting.

Car leases are normally paid off in monthly payments over a specified period of time, the "term" of the lease. Each payment includes a portion of the amount by which the vehicle will depreciate in value over the lease term, a finance charge (interest), and possibly sales tax (in most states).

By making a single payment up-front, you avoid monthly payments and save some money that would normally be paid as finance charges. However, you don't avoid all finance charges, only some of them. Since you never pay off part of the value of the vehicle (the lease-end residual value), you will pay interest on that value. By pre-paying your lease, you only avoid interest on the depreciation value portion of your lease.

There are also some other reasons that pre-paying a lease may not be a good idea. First, it negates one of the primary reasons for leasing, which is the fact that, with leasing, you don't tie up your cash in a depreciating asset -- an automobile. Your cash could likely be put to better use elsewhere. Second, if your vehicle is stolen or destroyed in an accident, your insurance only pays the market value of the vehicle and you stand to lose much of the money you paid into the lease. Without the pre-paid lease, the gap waiver in the lease would pay for any difference between insurance payoff and lease balance. You lose nothing. Furthermoe, you may have difficulty getting a sales tax refund from your state/county.

In summary, if you are thinking of pre-paying your next car lease, you should carefully consider the benefits versus the possible disadvantages.

Buying a car is expensive; there is no getting around that. It's easy to pay as much for a new car today as one might have paid for a house a generation ago. But they are more complicated than they used to be and they are safer, too. Still, there is the matter of the money, and if you don't have a lot to spend you may be considering leasing instead of buying. The low monthly payments offered with leases can be appealing, particularly if you are on a budget.

But there is more to leasing a car than just the low payment advertised in the commercial on TV. Anyone who is in the market for a new automobile should consider the pros and cons of leasing a car as opposed to buying one.

Here are some of the good points about leasing a car:

# The payments are lower – Sure, the payments are lower; you are only paying for the portion of the car's value that you are actually using, and not the car itself. The lower payments could help budget-minded shoppers, or they could allow the consumer to make a deal on a more expensive car than he or she might have otherwise purchased.

# Less cash outlay – It's possible in many cases to lease a car with less out of pocket cash than a purchase requires. This could help some shoppers who don't have a lot of cash for a large down payment.

The drawbacks to leasing include:

# Excess mileage fees – The lease spells out how many miles you may drive per year; if you exceed the total over the life of the lease you will have to pay extra. That extra fee could be as much as 25 cents per mile and some leases permit as few as 10,000 miles per year. If you drive a lot and you fail to consider this, you could be paying a lot of extra cash at the end of the contract.

# Early termination fee – If you have to end the lease early, the fee charged could be huge. How large? You might have to pay everything owed on the remainder of the contract. Even if you don't plan to end the contract early, it sometimes happens in the form of auto theft or an accident.

# You don't have a car – This one seems obvious, but with a lease, you don't actually own a car. When the contract is up, you give it back and you have nothing tangible to show for the money you have paid. You may, of course, purchase the vehicle for an agreed-upon price, but otherwise you will find yourself, once again, without a car to drive.

All small businesses need equipment and your cleaning business is no exception. But you don't necessarily have to buy the equipment to run your cleaning business successfully. Depending on your circumstances, leasing may be a better choice than buying every piece of equipment you need for your cleaning business.

What is a lease? A lease is an agreement in which you have the use of a piece of equipment, but you do not own it. The user (the lessee) makes payments to the owner of the equipment (the lessor). Leasing has become a common business practice. The U.S. Small Business Administration (SBA) reports that equipment leasing has risen about 20 percent over the past two years. And, according to the Equipment Leasing Association, 8 out of 10 U.S. businesses lease all or part of their equipment.

There are several advantages to leasing equipment:

1. Leasing is flexible. As your business grows your needs may change. Leasing allows you to add or upgrade equipment. Lease terms vary from 12 months to 60 months. You may even be able to upgrade your equipment during the original lease period.

2. Capital conservation. In today's financial environment, you can lease equipment with little or even no money down. If you have to borrow money to buy a piece of equipment you may have to put money down that you could have used in other areas of your business, such as marketing or wages. Leases generally require little or no down payment so it is likely you may be able to get more equipment or higher quality equipment than you could by buying.

3. Fixed predictable payments. When structuring the payments of a lease, look for fixed, monthly payments. This will protect you against rising interest rates and help you to project your cash flow outlays.

4. Leasing is cost-effective. Equipment in itself is costly and can also incur unexpected breakdown or repair costs. Most leased equipment is maintained and repaired by the owner of the equipment.

5. Tax advantages. Operating leases are generally 100 percent tax deductible as a business expense and are paid out of pre-tax earnings instead of after-tax profits.

6. Not having to deal with obsolete equipment. In today's business society, manufacturers constantly upgrade equipment and add new features. By leasing you can always be using the most up-to-date equipment. You also are relieved of the problem of getting rid of an outdated piece of equipment.

7. Convenience. Applying for a lease is generally easier than applying for a loan. Loans generally require large amounts of paperwork and copies of financial reports or tax returns. A lease agreement typically involves a brief application form and may not require supporting financial documents.

Before leasing, go through the following list of questions from the Equipment Leasing Association:

Before Leasing:

1. How am I planning to use this equipment?

2. Does the leasing representative understand my business and how this transaction helps me to do business?

During

3. What is the total lease payment and are there any other costs that I could incur before the lease ends?

4. What happens if I want to change this lease or end the lease early?

5. How am I responsible if the equipment is damaged or destroyed?

6. What are my obligations for the equipment (such as insurance, taxes and maintenance) during the lease?

7. Can I upgrade the equipment or add equipment under this lease?

After

8. What are my options at the end of the lease?

9. What are the procedures I must follow if I choose to return the equipment?

10. Are there any extra costs at the end of the lease?

When leasing equipment it is important to understand the terms of the lease. Getting answers to the above questions will help you get all the information you need about your lease and avoid surprises or hidden costs after you sign the lease.

With leasing you do not own the equipment, but your cleaning business has the advantage of using the latest equipment and staying on top of technological advances. With the many benefits of leasing, it may be a better choice for your company than the outright purchase of an expensive machine.