Tips to Qualify for Snow Plow Leasing: A Contractor’s Guide

For snow removal businesses, preparation is everything. The winter season can bring in strong revenue, but only if you’re equipped and ready to go by the first snowfall. Whether you're just starting out or expanding your existing fleet, investing in quality snow plows and other heavy-duty equipment can be a painful upfront expense. That’s why many business owners turn to snow removal equipment financing options to bridge the gap between seasonal cash flow and the new equipment necessary to operate.

In certain parts of the country, snow removal is a competitive business, and professional snow pushers know they need to have the best heavy-duty snow removal equipment possible to get ahead of the competition. Of course, the cornerstone of any snow removal business is the snow plow.

The substantial upfront cost of purchasing a new plow can be a major hurdle for many business owners, which is exactly why snow plow leasing can be such a powerful financial tool. Snow plow leasing offers a way to spread the cost of equipment financing over time, preserving working capital, and giving you the financial flexibility to invest in other parts of your business, like wheel loaders, snow blowers, spreaders, and other essential tools.

Like any other small business or snow plow financing option, securing snow plow leasing requires some preparation. This guide will provide a step-by-step roadmap for snow removal companies to qualify for snow plow leasing.

In this article:

• Understand the basics of how equipment leasing and lease-to-own agreements work.
• A step-by-step process to qualify for snow plow leasing options.

What to Know About Snow Plow Leasing

Before you apply, you’ll need to understand your leasing options and how lease agreements generally work. Unlike a traditional loan where you purchase the equipment outright with the help of a lender and start paying it off — a lease is essentially a long-term rental agreement. Like a loan, however, you will make regular payments to the leasing company for the right to use the equipment for a period of time.

At the end of a lease term, you typically have a few options:

1. Purchase the plow for a predetermined buyout price, which is usually smaller than the original cost. These terms may be laid out clearly in a lease-to-own agreement, if you choose to go that route at the start.
2. Return the equipment.
3. Renew the lease for another term.
4. Return the equipment and upgrade to newer equipment by starting a new lease.

The flexibility of snow plow leasing is an advantage for businesses that want to scale up their fleet to cover more parking lots and neighborhood streets without committing to long-term ownership. It can also be much faster than applying for a small business loan.

Step 1: Understand Eligibility Requirements

When you’re sure that you’re more interested in leasing than buying, then it’s time to figure out the eligibility requirements for snow plow leasing. Every lender and leasing company has its own specific criteria for leasing to a business. Generally, they’re more accessible than loan criteria, but will weigh your business’s financial health, operational history, and your personal credit history.

Some of the most important factors lenders or snow plow leasing companies will consider include:

• Business age: Lenders and lessors alike usually prefer to work with more established businesses that have a demonstrated record of profitability. Newer businesses may still qualify, but might have a more rigorous application process, higher down payments, or less favorable terms.
• Credit score: Any lender will review both your personal credit score and business credit score, if you have one. Your credit history is an indicator of financial responsibility, and the higher it is, the more likely you are to get approved for snow plow leasing with more favorable terms.
• Revenue and cash flow: Finally, any lender or lessor wants to ensure you can afford the monthly lease payments. They’ll look at your financial statements to analyze business revenue and cash flow, especially during the winter season and offseason. Positive cash flow statements and evidence of signed snow removal contracts can give your snow plow leasing application a boost.

Before you formally apply, you may be able to get a quick quote from companies to get an idea of what you might qualify for.

Step 2: Settle Lease Terms and Structure

You’ll typically request a specific type of lease when you apply. Snow plow leasing can be tailored to fit various needs, so understanding the terms and structures can save you money and headaches down the road. Some common lease structures include:

• Fair Market Value (FMV): Also known as an operating lease, these leases tend to have lower monthly payments since you’re only paying for the equipment’s depreciation during the lease term. At the end of the lease, you can choose to buy the equipment at fair market value, return it, or upgrade with a new lease. If you think you’ll stick with snow plow leasing to upgrade your equipment every few years, this is a great option.
• $1 buyout: Also known as a capital lease, $1 buyouts have higher monthly payments, but you will own the equipment for a nominal fee ($1) at the end of the term. This is a better option if your goal is to own the snow plow at the end of the contract, but can’t cover the significant upfront purchase cost.
• Seasonal payment options: Snow removal companies have a seasonal business model. There’s no snow in the summer, obviously, so it may make sense to structure snow plow leasing with a customized payment plan that aligns with the busy season.

Regardless of the lease structure you pursue, pay close attention to the lease term and buyout terms. The length of the lease may be anywhere from a couple of years to five years or more, with a longer one typically meaning lower monthly payments but a higher total cost over the term. If you’re interested in buying the snow plow at the end of the lease, make sure you understand what it might cost you.

Step 3: Gather Your Documentation

Getting organized before you apply can help save you time and streamline the application process. The more information you can provide upfront, the better. Different lenders and leasing companies may have varying requirements, but here are some common documents to have ready:

• Completed lease application: Equipment leasing applications tend to be much simpler than loan applications. You’ll need to provide basic business information, the type of equipment you want, and the desired lease term.
• Business bank statements: Recent bank statements from the last six months will verify your cash flow and revenue.
• Business and personal tax returns: If possible, tax returns from the past two years can help verify your income and financial situation.
• Equipment quote: An official quote from the equipment dealer detailing the specific snow plow you want to lease, its cost, and any included accessories.
• Business plan: It may not be required, but a new business seeking snow plow leasing should provide a business plan to show lenders your strategy for growth and paying the lease.
• Signed service contracts: Providing copies of signed snow removal contracts with clients is powerful proof of guaranteed income.

Step 4: Apply, Get Approved, and Finalize the Lease

Once you have your documents in order and a clear understanding of the lease terms, you’re ready to apply. The application process for leases is usually simple and can often be done online. Smaller lease applications may take just a few days, while larger or more complex ones may take a week or more.

Snow plow leasing is a significant expense, so don’t just accept the first lease offer you receive. Some companies may specialize in snow plow financing and could offer better rates or terms than others. Comparing offers will help you find the best deal for your business. While some terms are fixed, you might be able to negotiate certain aspects of a lease, such as the down payment, the monthly payment structure, or even the buyout amount. It’s a good idea to at least try to negotiate to get the best deal.

Finally, before you sign anything, read the lease agreement carefully to ensure you fully understand the terms. Some fine print to look for includes:

• Late fees and penalties
• Maintenance requirements
• Insurance requirements
• Usage limitations

Final Thoughts

When it snows, somebody needs to move it. Snow removal companies play an important role in keeping towns and cities functioning, making it an intriguing business model for anybody in areas with long, snowy winters. Whether you’re brand new to the industry or you’re considering an upgrade, by following these steps, you can confidently navigate the snow plow leasing process. This financing option can give you flexible access to the equipment you need to cover more ground and grow your operations without straining your finances.

FAQs About Snow Plow Leasing

Is it easier to get a lease for a new or used snow plow?

It may be easier to get snow plow leasing for new equipment. Lenders see new equipment as having a predictable value and less risk of mechanical issues. However, many leasing companies do offer financing for used equipment, though the terms and interest rates may be slightly less favorable.

Can I still qualify for snow plow leasing with bad credit?

You may still qualify, but you may have to offer a larger down payment, find a co-signer, or accept higher interest rates. Some lenders specialize in financing for businesses with bad credit, though, so it’s worth shopping and comparing financing options. You may also be curious of how to get a grant for snow removal business, but these are usually not available.

Does a lease payment count as a business expense for taxes?

Usually, lease payments for a snow plow can be fully tax-deductible as an operating expense. That’s a major advantage over a loan, for which only the interest is deductible. Make sure you consult with a tax professional to ensure you’re compliant with any deductions.

What happens if I want to end the lease early?

Always review the lease terms before requesting early termination. Ending a lease agreement early can result in significant fees. If there’s any chance you might want out of the lease early, try to negotiate out an early termination penalty before you sign.

How long does the approval process for snow plow leasing take?

The approval time will likely vary depending on the lender and your application. A simple lease with a strong application may take just a few days. A more extensive lease or an application with bad credit may take longer.

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