Innovative Leasing Options: Addressing Operational and Financial Needs

Introduction 

Most organizations need to effectively utilize their available funds, however, postponing capital investment is not feasible as it impacts the capability of the organization to meet its projections. This forces them to find innovative solutions.  Equipment lessors are stepping in to address the need for flexible, adaptable and cost effectiveness with flexible leasing options. This helps lessees whether they need seasonal payments or any other structure based on their business cycle. Providing these options could increase the manual effort and become error prone unless it is handled systematically with controls using equipment leasing software. 

This article explores some of the options becoming popular with both lessors and lessees.

Equipment-as-a-Service (EaaS) 

Equipment-as-a-Service (EaaS) has been used for a long time in different business scenarios and industries. For example, in construction where the contractor responsible for the construction assembles the crew and equipment to the site where work is to be performed. Now, this model is being expanded to other businesses to increase the effective utilization of resources transforming capital expenditure to operational expenses. The global EaaS market is expected to grow at a 50% compound annual growth rate through 2030. 

[ref:,Equipment Finance Advantage | Top 10 Equipment Acquisition Trends for 2024 | Washington DC] (https://www.equipmentfinanceadvantage.org/toolkit/10trends.cfm) 

Lease-to-Own Programs 

For some lessees, ownership of the equipment is very important as they may use the equipment for a long time but they do not desired to pay upfront for the purchase. To address the needs of these customers, lessors may offer a lease-to-own-program. With these programs the lessee acquires ownership at the end of the lease term. In some cases, lessors may provide options to the lessee options to purchase the equipment within the lease term. 

This minimizes the liquidity and financial risk for customers but ensures they have the equipment needed to keep the lights on. An example is critical instrumentation needed by a startup that is very expensive.

Asset Sharing 

Asset sharing differs from Equipment-as-a-service where a lessee retains exclusive use of an equipment for a period of time under EaaS whereas there is no exclusivity in asset sharing. Take the example of the airport, the equipment for baggage handling may be provided on asset sharing with each airline needing the equipment only for the duration of each flight’s arrival and departure of. While free, the same equipment could be used by another airline or for another flight.

This increases the equipment efficiency and cost effectiveness for both lessor and lessee. This is done in a more complex way in the container transportation industry.

[ref:,Monitoring Equipment Leasing and Finance Trends in 2024 | Contractors Hot Line] (https://www.contractorshotline.com/article/monitoring-equipment-leasing-and-finance-trends-2024). 

Incorporation of Equipment Lease Software Solutions 

Advanced equipment lease software solutions has revolutionized the equipment leasing industry. Enabling contract management, asset tracking, billing and invoicing, and compliance management they enable lessors to perform complex operations with adequate controls and automation. These solutions deliver efficiency and accuracy, reducing operational costs, and improved customer service. With real-time visibility, lessors are empowered  to make timely decisions to streamline their offerings and increase profitability. 

The growing popularity of flexible leasing options is reflected in the broader trends within the equipment finance industry. In 2024, it is estimated that 54% of equipment acquisitions will be financed, with a significant portion of businesses opting for leases or secured loans. This trend underscores the increasing preference for financing solutions that align with companies’ cash flow and strategic needs 

[ref:Equipment Finance Advantage | Top 10 Equipment Acquisition Trends for 2024 | Washington DC] (https://www.equipmentfinanceadvantage.org/toolkit/10trends.cfm). 

Conclusion 

Lessors need to be flexible and adaptable to the current market needs and trends. Lessors are providing innovative solutions like flexible leasing options, enabling businesses to compete and win in highly competitive markets. Models such as Equipment-as-a-Service, Lease-to-Own and Asset Sharing enabled with advanced equipment lease software is helping them create new revenue streams.