Last Updated on
August 10, 2022
By
Excedr
According to the Equipment Leasing and Financing Association (ELFA), almost 8 out of 10 companies in the United States rely on some form of financing to acquire equipment, including equipment loans, lines of credit (LOC), and leases.
Yet despite large amounts of capital being invested through financing in plant, equipment, and software by US companies, there remains a number of misconceptions about how equipment financing and leasing works and how businesses can wield it effectively.
You'e probably heard of hidden fees and rigid terms, factors that make leasing lab equipment sound less than ideal. In some cases, what you’ve heard might be right. However, that’s not always true. More than anything, it depends on the lender or leasing company you’re working with to secure financing, whether it be a loan, LOC, or lease.
This may be true for a majority of leasing companies, as they often have contractual obligations to specific manufacturers, but it does not apply to Excedr.
As a life sciences-specific lessor without contractual obligations to specific vendors, we can provide a wider range of manufacturer choices, allowing your lab to acquire the exact instrumentation you need.
We’re able to do this because our inventory is dynamic, meaning we do not typically sit on a static inventory of instruments. If you are interested in a specific make or model that isn’t listed on our site, we will (potentially—it depends on manufacturer availability) be able to lease it to you, providing a custom solution that does not limit your selection of scientific equipment based on vendor.
There’s no getting around it, interest rates and fees can affect your overall investment in a piece of equipment. Many lessees want to find the lowest possible rate, as they consider the total cost of the contract. However, it can be important to look beyond total cost and the comparison of interest rates and consider other financial factors, including monthly revenue and expenses, return on investment, and capital allocation.
When you consider that payment options can actually make budgeting easier if you’re determining a monthly ROI, you’ll notice that the idea, “leasing is expensive,” isn’t black and white. It requires taking more than just financial factors like total cost into consideration.
Where purchasing ties down your cash in a depreciating asset, leasing allows you to invest your cash in higher ROI opportunities—like hiring talented scientists who will develop or commercialize your company’s invaluable intellectual property. You rely on equipment and technology every day to operate and grow your business, but ultimately the value of those products comes from using them, not owning them.
With better technology, financing partners like Excedr can get a stronger picture of an applicant’s financial situation and create a more customized payment plan that fits the applicant’s needs, making an expensive purchase more affordable.
When it comes to leasing, some banks and independent lessors hide costs, fees, and penalties that can really hurt your wallet later on. This can really strain the partnership between the lessor and the lessee. A good leasing company prides itself on transparency throughout the process, and does not hide costs or fees that will hurt a company later on.
Financing can include the same issues as well. It’s important to understand the terms of your loan or line of credit so that you don’t find yourself in a tough financial position down the road. This includes understanding your repayment agreement with the lender, penalty fees, and more.
At Excedr, what is due is clear from the beginning of your lease experience with us. You won’t have to pay any hidden fees, ever. You pay for the instruments you rent and excellent service, and not a penny more.
The terms of various leasing and financing options can often be rigid. However, this is not always the case. Our leasing program gives you more flexibility. We’ve seen rigid term structures in the past, and know that those types of models don’t work in an industry like the life sciences or biotechnology.
The equipment you need to meet your goals today might not be required five years from now, and it’s likely that your laboratory may need to expand, upgrade, or renew instrument leases as it grows.
This is why we offer a wide range of lease terms, rates, and lease lengths, ranging from a minimum of two years to a maximum of six years, with custom lease payment schedules and flexible end-of-lease options. All of these features can be structured to your company’s unique financial and operational needs.
Many leasing companies and lenders manually underwrite, review, and approve lease or finance applications. The process is traditionally a long one, so it isn’t worth their time to work with most small business and early-stage startup applicants.
The work it takes to approve an applicant for a loan or lease makes small purchases much less impactful in the eyes of various financing partners.
However, our underwriting process is somewhat different than the traditional methods used. This difference means we can quickly process and approve lease applications, spending less time overall underwriting a company.
This makes smaller purchases doable on our end, allowing you to finance both larger and smaller purchases.
In a way, this myth is somewhat true. Traditional financing is notorious for being slow to process, consider, and approve or reject applications for equipment financing.
The underwriting process consists of piles of documents, paperwork, and red tape. Because of an extensive list of federal guidelines, a bank loan can typically take 60-90 days to process. Small businesses and startups often wait upwards of 6 months or more to hear about a loan application. It’s just too much time to wait for essential financing that gets them equipment critical to growth and scaling.
Fortunately, this myth doesn’t apply to more nimble lenders and independent lessors. Excedr does not need to go through as arduous an underwriting process as traditional financiers do, helping us review and consider applications much more quickly. In most cases, we can complete and potentially approve an underwriting in as little as three days, saving you upwards of 12 weeks or more in waiting time.
From there, we move onto estimates, meaning you can have the equipment you need installed and running in your lab much faster than when you finance an equipment purchase on your own through a loan.
It is possible for leasing to become more complicated than purchasing, however, buying equipment outright comes with its own issues and hang-ups. Compared with leasing, buying an instrument results in paying for the full cost of the model up front, in addition to shipping, installation, training; and installation qualification, operational qualification, and performance qualification (IQ/OQ/PQ) fees, not to mention additional costs for software, hardware, service contracts, and any extra instrument modules.
These fees can greatly complicate matters with your cash flow. You might also need to use a loan to purchase equipment, which can cause issues if the lender demands early repayment.
With leasing, your costs are consolidated into stable, monthly payments that easily spread costs out over time. Cash flow is not nearly as impacted. Furthermore, you avoid paying a down payment, which can be substantial, based on the equipment cost. You are also no longer responsible for the maintenance and repair costs of the equipment, as Excedr includes coverage in each lease agreement.
These financial benefits, such as manageable monthly payments, make leasing a straightforward and beneficial option for biotechs and life science companies.
Sharing lab space and relying on core facilities have long been tricks of the trade in the life sciences. But it’s less well-known that you can actually share the lab equipment you lease as well.
In fact, one of the savviest ways to substantially reduce leasing costs is to share your equipment with a neighboring lab, and Excedr encourages you to do so through our leasing program when your budget is tight.
All we ask is that you let us know who you want to share your equipment with and we’ll work out a practical plan for both parties.
Equipment finance myths, whether they are about leasing or loans, can often hold some truth. Especially when you are dealing with larger, more traditional businesses. However, when you work with Excedr, the common myths about leasing no longer apply.
Our contracts include founder-friendly lease terms that make it easier for new and established business owners alike to acquire the equipment they need to operate at the highest level without limiting manufacturer selection, surprise hidden fees, or rigid or complicated terms.
Furthermore, unlike traditional lenders, we don’t rely as heavily on credit score or credit rating, and include forward-looking metrics in our application considerations. Our flexible leases, end of the lease terms, and nimble underwriting make it more possible for startups and small businesses to access a finance solution that doesn’t adhere to the status quo, the present state of affairs responsible for common equipment finance myths.
Meet your operational business needs through Excedr’s leasing program, whether you require new equipment or something refurbished. Request a lease estimate and we can begin the underwriting process.