Do you want to start a equipment leasing company? If YES, here is a complete guide to starting a equipment leasing business with NO money and no experience plus a sample equipment leasing business plan template.
Equipment leasing business is a process by which an entrepreneur buys several equipment that most individuals or other businesses do not consider worthwhile to purchase either because the equipment is rarely used or there is are budget constraints towards purchasing a new one.
The company then allows them lease it for use whenever the need arises for a certain agreed price. According to statistics from the Equipment Leasing Association of America, 80% of businesses in the united states lease equipment on a regular basis, which makes it quite a lucrative business for anyone that is planning to go into such business.
First thing about starting this business is to have a vision and plan how you intend the business to be, this is where having a business plan comes in. In writing your business plan, you need to determine what type of equipment you intend to lease.
You could decide to lease heavy equipment like bulldozers, or smaller items like forklifts. Your business plan should also include information on how you intend to run your business and the strategies that you would apply to ensure that your business stands out from that of your competitors.
Also important in your business plan are financial projections which will come in form of an income statement, cash flow statement and a balance sheet..
Marketing is a very essential part of any business, so marketing your equipment leasing business is essential if you want to make profit for your company as well as get more customers. You might need to use several conventional and unconventional modes of marketing.
Also, consider giving out incentives or lowering the rate a bit to attract new customers and swell your customer base. Here is a comprehensive information you will need to start an Equipment leasing business;
Steps to Starting an Equipment Leasing Business
1. Understand the Industry
The equipment leasing business industry is a very large one and according to the Equipment Leasing and Finance Association (ELFA), businesses lease an approximate amount of $1.2 trillion in assets annually, which includes office equipment, computers and software.
According to ELFA, an equipment financing company can be said to be responsible for a large piece of the overall capital expenditure budget across the whole United States.
Businesses in this industry usually lease or rent the machinery or equipment without operators. Most of equipment leasing companies are usually located in areas where infrastructure requirements are needed. This is due to the fact that equipment have to be located near the projects especially places like the highways and other construction sites.
Interesting Statistics About the Industry
Based on data from the United States Census Bureau’s County Business Patterns, the three states with the highest number of equipment leasing companies are; Texas with 17.4%, California with 11.6%, and Louisiana with 7.9%. Also, it was found that the Southeast and Southwest regions accounted for more than 50% of equipment leasing companies.
The industry has $38 billion revenue with an annual growth of 4.8% for a period of five years (2011 to 2016) with about 18,060 equipment leasing businesses in existence.
Usually, the range of downstream businesses that lease from this industry have always sheltered the overall industry from volatile fluctuations. However, the recession which affected the entire economy overwhelmed the resilience of the industry, thereby leading to a decline in revenue.
However, demand from the downstream sector will be a strong driver for the industry’s performance between 2016 and 2022. This is because as the economy booms, there will be more construction and transportation businesses, which will cause disposable income as well as corporate profit to rise, thereby leading to an increase in demand for equipment lease.
Globally, equipment leasing revenue is expected to surpass $110 billion by 2019, which will grow at an annual rate of about 7%, according to research from Technavio.
Also, the strongest markets exist in Europe and North America, while countries like China and india have shown a strong growth potential. Major leasing categories fall under sectors such as construction, agricultural, mining, and forestry equipment.
Other categories include; medical equipment, aircraft, steamships, tugboats, as well as railroad cars. Demand is usually driven by industrial and business activities that are in nonresidential construction. The profitability for individual companies’ depends on factors such as merchandising mix and cost of financing leasing inventory.
While larger companies have the advantage of economies of scale especially in buying equipment and also having multiple outlets to share their equipment, smaller companies often compete by not only providing a superior customer service but also providing specialty products for markets locally.
The equipment leasing industry in the United States is concentrated, with the top 50 companies accounting for about 55% of the revenue.
According to ELFA, growth slowed in 2014, but remained above the 10 year industry average especially in the midst of steep competition as well as moderate business investment in the equipment leasing industry. The industry growth decelerated from 9.3% in 2012 to 6.7% in 2014.
Turmoil in the global economy has hurt growth in the United States and also dampened the business environment. Due to a hyper-competitive environment, more companies had to compete especially on price while accepting thin margins.
However, as the economy is getting healthier with rising profits, companies are beginning to maintain a strong portfolio. Also, competition has encouraged companies to maximize their proficiency and efficiency, while also pushing them to develop competitive advantages.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those that require the services of an equipment leasing company, are obviously businesses in all sectors of the economy such as construction, agricultural, mining and forestry equipment; also medical equipment, aircraft, steamships and tugboats, as well as railroad cars.
Others who also use the services of an equipment leasing company are individuals who want to use such equipment such as software and other computer components for light projects.
3. Decide Which Niche to Concentrate On
Regarding the niches that can be found within the equipment leasing business, there are really no clear cut services that differentiate one equipment leasing business from another. However, most equipment leasing companies usually offer additional services to enable them stand apart from their competitors. Some of the areas of specialization in the equipment leasing industry are;
- Equipment leasing
- Equipment leasing broker
- Equipment leasing loan
- Equipment financing
- Specialist equipment leasing
One thing about all the areas of specialization that have been mentioned is that smaller businesses might not be able to go into more than one area of specialization. However, medium and large scale companies might be opportune to offer more services as they would have more capability to handle more of the services.
The Level of Competition in the Industry
Depending on the type of equipment leasing business you would want to go into, it might be easy or difficult to start up as some equipment are more capital intensive than others. If you intend to go into equipment leasing for items like software, computer and electrical components, then it might be an easy enough business for you to start off.
However, if you are looking towards leasing heavy equipment like trucks, forklifts, then you might need more capital to start off. Either way if you are serious enough, you could start your equipment leasing business after serious planning.
While it might be easier for larger equipment leasing companies to have an edge over the smaller companies in the industry due to their networking capabilities, smaller equipment leasing companies can also compete by offering specialist services to customers in their local areas.
4. Know Your Major Competitors in the Industry
Every industry has brands which perform better than the others. These brands often become well known due to a number of factors which are often responsible for their being popular over the years. As a new business, you would need to ensure that you study these well-known brands and find out what makes them unique and better than the others. Some of the well known brands in the United States of America are as follow;
- ARI Fleet Leasing
- Aaron’s Inc.
- CAI International Inc
- General Electric Company
- Sunbelt Rentals
- United Rentals Inc.
- Trinity Industries Inc.
- SeaCube Container Leasing Limited
Economic Analysis
If you have decided to start an equipment leasing company, then you should ensure that you carry out a thorough investigation into the business so as not to start a venture that wouldn’t be beneficial to you financially. This is why it is usually necessary for you to have a business plan as the financial projections in your business plan would help you determine if you need to go into the business or not
The equipment leasing business has recently been affected by the downturn of the economy, as more businesses that usually lease equipment had to close down.
However, things have begun to pick up as the economy is slowly looking up and the equipment leasing industry is slowly seeing more revenue being pumped into it. According to research, in the next five years, the equipment leasing industry would boom and the revenue would flow for equipment leasing businesses, so if you are looking to start the business, it is best to go into it now.
Another thing you would need to consider is what type of equipment you intend to lease, as this would affect the location with which you intend to run the business.
It would be foolhardy for you to run a mining equipment leasing business in a financial business district as there would be no one to patronize you. If however you are determined to start a specific kind of equipment leasing company, you might need to move to a location that would be favourable to your business.
5. Know the Possible Threats and Challenges You Will Face
Every business, both new and existing experience threats and challenges that can either make the business fail or grow stronger; the equipment leasing business is not different. Threats and challenges usually faced by businesses in the equipment leasing industry include, poor patronage due to an economic downturn, arrival of more competitors offering same niche.
This is why every entrepreneur should thoroughly research on a business so that he or she would have had solutions for every challenges or obstacles that would be encountered in the course of running the business.
6. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Depending on the type of equipment you intend to lease, you could either start the business as a sole proprietorship, partnership or Limited Liability Company (LLC). The legal entity decision is one that should be taken very seriously as choosing a wrong one for your business might have dire consequences.
If you however are not too sure of which legal entity would fit your business, it would be best if you approach an attorney who is an expert on leasing to help you in choosing what would be right for your business.
choosing a legal entity like the sole proprietor is best for those who are leasing light equipment such as certain software, computer and even electronics. The sole proprietorship form of entity is easy enough to start up and does not involve too much of paperwork.
Choosing the general partnership structure is for those who intend to have a business partner in the equipment leasing start-up business. However, majority of those in the equipment leasing business usually prefer to start a Limited Liability Company (LLC).
The Limited Liability Company (LLC) is favourable to those who intend to run their business as a separate legal entity. It is usually favourable due to the fact that it offers great tax advantages plus the owners are not liable personally for anything that goes wrong in the business.
7. Choose a Catchy Business Name
If you are looking for a very catchy business name to use for your business, you can consider any of the following names;
- Rentals Corp
- General Equipment Leasing
- Affordable Leasing
- Bob Leasing
- Sunnyville Leasing Company
8. Discuss with an Agent to Know the Best Insurance Policies for You
Regardless of what legal entity you intend to start your business with, getting insurance for your equipment leasing business is an important decision that might have serious consequences if you do not want to bother about insurance or even pick the right one.
As an entrepreneur, you should note that every business requires insurance, and so if you are not sure of what insurance would best suit your business, then you might need to approach an insurance broker to help determine and advise you on what insurance would best suit your equipment leasing business.
However, some of the basic insurance covers that you should consider getting if you intend to run your equipment leasing business in the United States of America include;
- Business Owner Policy
- Directors and Officers Liability Insurance
- Key Man Insurance
- Business Interruption Insurance
- Contingent & Excess Liability Insurance
- Conversion and False Pretense Insurance
- Vicarious Liability Insurance
- Asset Insurance
9. Protect your Intellectual Property With Trademark, Copyrights, Patents
The equipment leasing business is not one that requires an entrepreneur to buy or apply for an intellectual property protection. Most business owners in this industry do not consider getting an intellectual property a top priority. However, if you decide that it is important for you to get one; you can apply to have your company logo intellectually protected.
10. Get the Necessary Professional Certification
If you are serious about starting your equipment leasing business in the United States of America, then you do not need to bother about getting professional certification as it would not be necessary for you to do so.
However, this does not mean that there are no regulations or permits guiding the business especially certain kinds of equipment leasing. As an entrepreneur intending to go into this business, you would need to ensure that you find out whatever permits you might need to get before starting this business, so that you do not find yourself on the wrong side of the law.
11. Get the Necessary Legal Documents You Need to Operate
Having legal documents for your business is a must for any entrepreneur that intends to run an equipment leasing business in the United States of America. Listed below are some of the basic legal documents that you would need to run your equipment leasing business successfully.
- Certificate of Incorporation
- Business License
- Business Permit
- Business Plan
- Operating Agreement
- Contract Document
- Insurance Policy
- Employer Identification Number (EIN)
12. Prepare a Detailed Cost Analysis
The cost of starting an equipment leasing business depends totally on what kind and scale of business you intend to start. If you intend to go into heavy equipment leasing, you would naturally not spend the same as someone who wants to go into light equipment leasing business.
This implies that your capital is only low depending on the kind of business you want to start. If you do not have the necessary capital or haven’t been able to source for the right amount of capital, then you might consider starting with little equipment and climbing up from there.
Some of the items that you would require if you are intending to launch your own equipment leasing business in the United States of America include;
- Total fee for incorporation would cost $800
- Budget for liabilities and a business license would cost $2,500
- The amount needed to acquire a facility that would be used for both administrative and equipment storage purposes for a period of at least one year would cost $50,000
- Cost of equipping the office with computers, printers, office furniture, filing cabinets, phones, safety gadgets et al, would cost $5,000
- Cost of acquiring a van would cost $20,000
- Cost of launching an official website would cost $500
- Additional expenditure for signage, business cards, as well as adverts would cost $1,000
From the above detailed report, if you intend to start your equipment leasing business on a small scale in the United State of America, without including cost of the equipment you intend acquiring, you would need an average of $90,000.
If you intend to start the equipment leasing business on a medium scale in the United States of America, you would need to spend as much as $180,000, with the amount for acquiring the equipment not inclusive.
If however, you intend to start the equipment leasing business on a large scale in the United States of America, you would need at least $360,000 as your start-up capital. This amount is not inclusive of whatever equipment you intend to acquire.
13. Raise the Needed Startup Capital
Finance is a very important part of the business. Most of the aspects of any business are tied to the availability of finance, and so if you are looking to start your equipment leasing business and do not have the necessary finance needed to start the business, then you should know that your business is not likely to succeed.
As an entrepreneur, it is not easy sourcing for capital to start up a business, but it is a necessary task that you must go through.
Approaching investors for necessary finance is not usually an easy affair but if you have a business plan, it is likely to be easier for you. This is why having a comprehensive business plan is highly necessary. Your business plan allows an investor know how serious you are taking your business and also if the business is likely to succeed.
No investor will part with their money if they do not see a concrete plan of what you intend to achieve with the money. Some of the available financing options that exist for you if you intend to start your equipment leasing business include;
- Approaching a financial institution or bank to source for loan
- Approaching an investor to seek for start-up capital
- Making use of high family and friend sources in sourcing for capital
- Sale of personal properties and stock to raise capital
14. Choose a Suitable Location for your Business
The location that you would need for your equipment leasing business depends on the kind of equipment leasing business you intend to run. You need to ensure that the location you would eventually use is one where businesses that lease would come for your equipment.
This means that if you intend to run a movie equipment leasing company, it would be better for you if your business was located in Hollywood or any other hub where there are likely to be a lot of movie shoots. Citing your business away from Hollywood would see you losing a lot of clients to your competitors.
15. Hire Employees for your Technical and Manpower Needs
Most of the equipment and tools that will be used by you if you intend to start your equipment leasing business are ones that can be bought for fairly used.
However, if you intend to get heavy equipment to lease out, you would need to get genuine ones so that you can lease them out for a very long time and get your capital back without having to replace them or repair them constantly. Some of the tools that you would need to help you run your equipment leasing business successfully are;
- Computers
- Phones
- Filing Cabinets
- Safety Gadgets
- Maintenance Tools
- Printers
- First Aid Box
Depending on the nature of the equipment leasing business, you can run the business alone. However, if you intend to start an equipment leasing business that is capital intensive, you might need the help of others in running the business, especially if you are going to be leasing a facility.
The number of employees that would be needed to run an equipment leasing business will definitely vary depending on the scale of your business. If you want to run a medium or large scale equipment leasing business, you would need to employ a Manager, Marketing Executive, Equipment Maintenance Personnel, Front Desk Staff and Accountant. This is about 6 to 15 people.
The Service Delivery Process of the Business
The process involved in the leasing of equipment depends purely on the kind of equipment you would be leasing. The process would range from getting the documents that would be used to sign an agreement with customers. Thereafter, the customer can then take charge of the equipment after paying the agreed rate.
16. Write a Marketing Plan Packed with ideas & Strategies
Marketing is a very important part of running a business, as the right marketing mix could ensure that your business not only grows but becomes a success. This is why your business plan is very important, as it would contain thoroughly researched marketing strategies that would help bring in revenue for your equipment leasing business.
If you are going to be starting a medium or a large scale equipment leasing business, then you should know that your marketing strategies have to be top notch especially as you would be competing with other established equipment leasing businesses. Some of the marketing ideas and strategies that would be needed in running your equipment leasing business include;
- Ensure you introduce your equipment leasing business to those who would be interested in leasing from your company.
- Advertise your equipment leasing business online in forums and blogs.
- Advertise your equipment leasing business offline in local newspapers and in yellow pages ads.
- Attend seminars and expos that is directly related to the businesses with which you intend to lease your equipment to, that way you make the right contacts.
- Use your official website to market your business.
- Ensure that you engage in direct marketing.
- Use word of mouth marketing to promote your equipment leasing business.
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Every business requires strategies that would help boost the business whilst also creating a corporate identity for your equipment leasing business. Some business owners usually hire brand experts that would help in crafting forth these strategies.
Here are some of the platforms that you would need to leverage on if you intend to boost awareness and create a corporate identity for your equipment leasing business;
- Ensure that you vigorously advertise your equipment leasing businesses via local newspapers, radio and television adverts.
- Promote your business thoroughly via your official website.
- Make good use of social media platforms such as Linkedin, Facebook, Twitter and Google Plus, to promote and create awareness about your business.
- Ensure that you distribute your fliers and post handbills in target areas and conspicuous places.
- List your equipment leasing business in online directories as well as offline directories as well.
- Ensure that your loyal and satisfied customers help with referrals.