With lease financing being used by eight out of 10 businesses in the U.S. today, and accounting for about one-third of new equipment acquisitions, most business owners are generally familiar with leasing. When an improving economy releases pent-up demand for capital equipment, many companies may find their financial conditions not rebounding fast enough to purchase new equipment outright. Executives facing finance vs. cash purchase decisions may not fully know how the strategic use of equipment financing can enhance financial performance and capital productivity. A deeper understanding of the lesser-known points of lease financing, including asset management, tax treatment, insurance and maintenance, and lease options can better enable overall business performance.

Lessons from the Equipment Leasing and Finance Industry
The equipment leasing and finance industry has been managing assets and employing strategies to ensure the most productivity is gained from equipment for more than 40 years. Companies that acquire significant amounts of equipment can learn valuable lessons from the equipment finance industry by reviewing their strategies and programs for efficient asset management. They can be easily adopted by most businesses, especially mid-sized to larger companies.

"Asset management" is a term used since the 1980's that basically means the ability to plan, acquire, manage and recycle assets in a systematic manner. Each stage of asset management has a significant impact on portfolio return and profitability. The asset management function should be employed throughout an asset's entire life cycle from the delivery of equipment to its installation, use, maintenance, and finally de-installation and disposition. Most companies do not employ a formal asset management program. However, equipment finance companies have noted a growing trend among senior managers of companies that acquire large amounts of equipment to seek methods that will reduce their need for additional capital, as well as improve productivity from the current mix of assets. Over the next five years, asset management programs are expected to become standard in medium- to large-sized organizations, and equipment finance companies are being called upon to provide asset management expertise to companies seeking help with their programs internally.

Financial Goals First
Careful consideration of financial goals, such as improving cash flow or meeting a return on net assets, is the foremost consideration of an asset management program. Establishing acquisition guidelines based on equipment needs as well as financial objectives also is crucial.

These goals - different for each organization - should also be factored into the criteria for measuring the performance of a division or business unit.