Leasing for start-ups and entrepreneurs

Many entrepreneurs and start-ups assume that leasing is only an option for established companies with several years of accounts behind them. That is not the case. There are lessors with different requirements and assessment models, and some of them specifically take into account that new businesses do not have a long track record.

Once you have read this article, you will know what is typically required to be credit-approved as a new business, how you increase the chance of getting an offer, and when leasing is a better alternative to a loan or saved-up capital.

Can a start-up lease equipment?

Yes, it is often possible, but the assessment differs from that of an established business. Without several years of accounts to rely on, the lessor instead looks at other factors that together give a picture of the company's risk.

What do lessors look at for new businesses?

The owners' and the director's finances. For young companies a personal assessment or guarantee from the owner is often brought in, since the company does not yet have an independent credit history.

Industry and business model. Some industries and business models are assessed as more predictable than others, which can affect both approval and terms.

Budget and expected revenue. A realistic budget, preferably supported by orders, contracts or LOIs (letters of intent), strengthens the case significantly.

Type of equipment and resale value. Equipment with a stable second-hand value, such as machinery or office equipment, is easier to finance than highly specialised equipment, because the lessor's risk in the event of default is lower.

Any down payment. A down payment can in some cases make an agreement easier to get approved, although it is also possible to lease without a down payment.

How to increase your chance of approval as a new business

• A realistic budget, a short description of the business and any documentation of orders or customers make the assessment easier for the lessor.
• Be prepared for a possible personal guarantee. Many start-ups are asked for a guarantee from the owner. This is not unusual and should not stop you from applying.
• Consider the equipment's resale value. The more standardised and sought-after the equipment is on the second-hand market, the easier it is typically to finance.
• Lessors assess new businesses differently. A rejection in one place does not mean another company will assess the case the same way.
• Consider a smaller down payment. Although it is not a requirement, a down payment can in some cases make a marginal case easier to approve.

Benefits of leasing for a new business

Preserves start-up capital. In a start-up phase, liquidity is often the most critical resource. Leasing makes it possible to acquire equipment without tying up large parts of the start-up capital in a single investment.

Access to equipment without a full credit line. Because the lessor in practice has security in the equipment itself, leasing can in some cases be achievable even when a traditional bank loan is not.

Predictable finances from day one. A fixed monthly payment makes it easier to budget in a period when revenue is often hard to predict precisely.

Ability to scale equipment with the business. With operating leases it is often easier to adjust or upgrade equipment as the business grows and needs change.

What if you are rejected?

A rejection from one lessor does not mean that leasing is not an option. Lessors have different requirements and risk profiles, and a case that does not match one company's criteria may well match another's. This is exactly where Leasing Helper searches the market broadly rather than approaching just one company.

Have your options checked for free

At Leasing Helper we search the market for you and send your needs out to tender with several lessors - including those with experience in assessing start-ups. We cannot guarantee approval, but we can often find options that the company would not have found on its own.