Equipment Leasing: Meeting a variety of church needs
As published in Worship Facilities, Aug/Sep 2005
Does your church need an expensive piece of equipment in order to run its office operations, maintain its facilities, or spread its message? But is the cash outlay more than your church can afford at this time?
You may want to investigate the possibility of leasing that piece of equipment. And if you decide to go this route, there are a lot of companies out there ready to help you out -- and a few important points to keep in mind.
Leasing is a vehicle used by churches to acquire a wide variety of equipment, according to Bob Arnowitt, vice president of sales for First Capital Equipment Leasing Corp., an East Sandwich, Massachusetts-based equipment leasing and financing firm serving business, non-profit, and governmental entities. The company helps churches acquire items such as audio-visual (A/V) equipment, musical instruments, office equipment, computers, vehicles, vans, and other capital items.
"We do a lot of transactions, in the $2,000 to $75,000 range, that involve A/V equipment providers and churches," Arnowitt says. Transactions in the $75,000 to several-million range include those for large churches that own radio and/or TV ministries, he explains; meanwhile, smaller leases include those "for multi-media 'worship assist' equipment that combines words, images, and music on large screens, something more and more churches are finding especially appealing to younger people."
Affordability and flexibility are the two major reasons churches turn to leasing, according to Frank Mitchell, national sales manager for Quail Financial Corp., an equipment leasing and financing firm based in Garden Grove, California.
"To pay upfront takes a great deal of discussion and, in some cases, an appeal to the congregation for additional funding," says Mitchell, "while leasing allows the church to pay out of the operating budget while the equipment is being used and facilitating the ministry of the church."
That scenario fits in well with the way many churches prefer to handle money, according to Arnowitt.
"A lot of churches don't want to tie up the hard-gathered money they are able to save in assets that will be serving them for six or seven years. Many churches feel they have better uses for their funds, such as supporting current operations or the charitable causes they are involved in," Arnowitt explains. Leasing, however, allows a church to get needed equipment today and pay for it with the money they receive through regular giving. This allows them to better match their expenses to their cash flow."
Mitchell, meanwhile, adds that leasing also allows a church to more easily fund upgrades to equipment when and if the time comes. "As technology changes/improves, or as the congregation grows, sometimes equipment must also change to keep pace -- and leasing is an excellent financing vehicle that allows this to take place."
Easier budgeting, the ability to incorporate technology upgrades, and leaving maintenance the responsibility of the equipment vendor are important advantages to leasing, according to Linda McMillen, operations executive for Northwoods Community Church, a large (3,200 weekly attendance) Peoria, Illinois-based church that leases its copiers, phone system, postage machine, and a tractor.
"We have found leasing to be easier on the budget, and it helps you stay current with technology," says McMillen. Costs are consistent on a monthly basis, she notes, "and our experience has been that by the time your lease is up and it's time to replace [the equipment], the monthly lease increase is minimal." And as a bonus, "Maintenance becomes the issue of the supplier, and we are not caught needing to make large cash outlays without time to plan and prepare."
Churches looking to lease equipment can contact a leasing/financing firm either directly or via a referral by the equipment vendor, according to Arnowitt. Whichever route they find themselves following, they'll likely find the approval process at a firm that works with -- and understands -- churches to be somewhat different from that of a business-oriented firm.
"It is not unusual for churches to not have the financial statements - formal balance sheets, income statements and projections - that a conventional banker wants from any business applying for credit. Our programs are 'application only', with no financial statements required on transactions up to $75,000," Arnowitt says. As a leasing/financing firm doing a lot of church-related business, "All we need know about is the size of the congregation, weekly collections, and church management and structure, to get a feel for the economics involved."
"Compared with businesses, for which I need tax returns and audited financial statements, the amount of information needed from a church is significantly less," says Eric Bryant of Quest Financial Corp., a Newport Beach, California-based equipment leasing and financing firm. In evaluating an equipment lease transaction involving a church, "The financial information required is relatively limited -- we are basically looking at the monthly expenses versus how much the church members are giving each month," he says.
Churches have choices among different types of equipment leases, which typically fall into one of two broad categories: "operating" and "capital" (or "lease-to-own").
"An operating lease is similar to a car lease, where you make use of the asset for a set period of time with the option to return the asset at the end of the lease," says Mitchell. With a capital lease, "There is generally a minimal buyout amount paid at the conclusion of the lease to accommodate the customer's original intent to own the equipment." For a church (or any other type of customer) wanting the ability to upgrade leased equipment during the lease term, "An operating lease with a both a lower payment and the option to refresh the equipment might be the right financial vehicle."
For churches just starting out in the equipment leasing world, there are a number of tips to keep in mind.
"Go with a leasing company that has a comfort level with church organizations," recommends Mitchell. Not all leasing companies are created equal, he says, "and as a matter of fact, not all have an interest in non-profit organizations."
Make sure the church oversight organization is aware of and supports the need for the equipment, and understands why leasing is the way to go about financing it, Mitchell adds. Also, "Make sure the church has a technology person that understands and evaluates the equipment and all the costs involved."
At that point, the time is right to approach a leasing company with an estimate of costs so that financing options can be discussed. "If the purchase amount exceeds $25,000," says Mitchell, "the church should be prepared to share financial information so the credit review can be expedited."
McMillan recommends that you carefully assess what your needs really are before entering into a lease for any kind of equipment. And when determining exactly what firm is going to provide you with a leasing vehicle, "Obtaining good references from seasoned users of both the equipment and the service provider is critical."
"When selecting a leasing company -- or any vendor, for that matter -- service, service, service is what matters," McMillen says, adding "Building a relationship with a provider that understands your needs is key."
Quick Links
First Capital Equipment Leasing Corp.
Service: Equipment leasing and financing
Quick Link: (800) 541-0114
URL: www.leaseexperts.com
Quail Financial Corp.
Product: Equipment leasing and financing
Quick Link: (714) 663-8686
URL: www.quailfinancial.com
Quest Financial Corp.
Product: Equipment leasing and financing
Quick Link: (800) 728-8873
URL: www.questfinancial.com
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