Imagine being able to outfit your growing business with a new computer network and furniture without having to go to your bank for financing. Better yet, imagine getting your lease approved in a few hours and the lease closing in a couple of weeks. You have just imagined the benefits of a small ticket lease.

During 2007, small ticket leasing was a multi-billion dollar industry in the US Many equipment vendors or their financial partners offer this form of financing at the equipment point of sale to make equipment purchases more convenient. Clients like this form of financing because approvals are usually granted within a few hours or a couple of days. Not only is it a convenient way for businesses to purchase equipment costing less than $100,000, but customers can often keep their bank lines of credit for other uses.

Leasing and financing companies like low-cost leases because they are easy to originate, approve, and process. They lend themselves to credit rating and facilitate diversification of leasing portfolios. Also, small leases are in high demand.

In general, small ticket leases are designed for teams totaling less than $100,000. At some larger providers and leasing companies, the amount can be as high as $200,000. Most of these leases do not require financial statements from the business, but often require the personal guarantees of the owners/principals of the business. Most are written based on requests submitted by prospective clients. These requests are then processed by the leasing companies using credit scoring models.

Small ticket lease transactions can be used for almost any type of equipment. Many transactions allow users to include some soft costs and/or software. Lease terms are generally 36-72 months with most lease payments due monthly.

Small ticket leases often include only one or two pages. One drawback to this type of financing is that most leasing companies and providers do not allow for lease negotiations or contract changes. Because this is typically a high volume, relatively low margin business, it is generally not profitable for them to spend time negotiating the transaction.

Credit scoring models have been used to help process small leases since the early 1990s. The original credit scoring models were developed in the 1980s by Fair Isaac and Company, a credit scoring service. Using statistics, they determined that the personal credit behavior of a company’s key owners/directors is a strong predictor of its business credit behavior. Simply put, a business owner who pays personal bills on time will usually make his business pay bills on time.

While most large leasing companies use credit scoring models for small leases, more than 90% of these transactions are credit rated when under $50,000. Many systems use as many as 20 factors to assess creditworthiness, with the primary factor being the credit history of business owners and key directors.

Other business-related factors used to rate these transactions include:

1) the company’s time in business;

2) size of the company;

3) industry;

4) the form of organization of the company;

5) history of paying bills on time;

6) net worth of the company;

7) average bank balances;

8) the relationship between debt service and cash flow; Y

9) any recent judgment, bankruptcy or collection agency.

Some small ticket leasing companies have special groups for higher risk customers. They typically charge these clients higher rental rates and sometimes offer lease terms that are less attractive. Other leasing companies request credit enhancements, such as additional collateral or external guarantees.

There are several ways businesses can improve their chances of qualifying for small leases. Most involve improving the pay patterns of companies and their directors. Here are some specific steps business owners can take:

* Pay all back taxes

* Establish links and pending sentences

* Pay bills on time and be consistent with payments

* Eliminate vendor disputes by resolving with any vendor or former employees

* Sell or factor accounts receivable to improve cash flow

* Register your company with the Secretary of State where your company is incorporated

* Buy from vendors that report activity to major credit bureaus

* Set up automatic debit from the account with the leasing company to help eliminate the possibility of paying late

Small leases are a very useful form of financing for small businesses. These transactions are fast and convenient. Many equipment vendors offer this form of financing themselves or through low-cost leasing partners. Take advantage of this convenient form of financing to quickly acquire the necessary equipment and move your company forward.