In another example of Internet-based business for the equipment sector, California-based Lease2save.com, Inc., a new online equipment-leasing company, has launched a "revolutionary" service that allows lenders nationwide to bid for the right to fund leasing proposals directly online.
The eight-month old company launched its Web site last week and already has had several lenders sign up.
"We've had about five of the top biggest banks in the U.S. actually sign up with us," said Robert Cartagena, vice president of operations for the company.
Big-name lenders such as Allstate Leasing, online service Secure Direct and GE Capital, have already signed on.
What makes Lease2save's Web site so one-of-kind is that it has a service that enables business owners and equipment sales representatives to create their own lease proposals with custom-payment plans.
Lease2save actually takes these lease applications and posts them on the back-end of its site. The back-end of the the Web site is the actual point where the transactions occur. When lenders register with the company they receive the private URL (universal resource locator) for the site, as well as a user ID and password. When the bank becomes a registered user, it may visit the site and view the applications. If the lender sees something it likes, it can bid for the right to provide the funding.
"It's like an auction on the back-end of our site," Cartagena said. "One bank in Florida may say, Well I'll do that for 0.045% lease-rate factor' and another one in California may say Well, I'll do it for 0.0432%."
Business owners and "purchase-decision makers" can sign on to the Web site to retrieve information and view the leases. Cartagena explained that anyone involved in the decision-making process regarding purchase of equipment for a company needs to evaluate what their best acquisition option is.
Most often this means that they would have to determine, if they are not making a cash purchase, whether they need to lease or take out a loan to purchase their operating equipment.
"It could be anything as small as a Sub-Zero refrigerator for a restaurant or 2,500 cash registers for Wal-Mart," he said. "Controllers and CFOs typically are responsible for making that decision."
Lease2save's Web site provides a side-by-side comparison showing the differences between leasing, taking out a loan or taking out a cash purchase - a process that Cartagena says sounds much easier than it really is. Companies faced with these options must take into consideration state tax rates, tax benefits, depreciation benefits and the present value of cash, he said.
"Ten thousand dollars cash is worth more to any business owner than $10,000," Cartagena explained. "You can take that and actually put it in a bank and gain 7.5% or 8% interest off of it. But that's on the low side. Cash that is owned by a business is worth anywhere from 10% to 40% more. Our patent-pending software allows someone to actually do this online."
Lease2save anticipates that it will be remaining in the equipment sector for quite some time due to its profitability. Cartagena also speculates that the company's Web site may have sparked a new phenomenon. However, he does not fear competition, explaining that the Web-based applications would require "hard hitters" and an extensive team of computer programmers.
"It took us eight months to do this," he said. "I think that even with all the money in the world, this is still technology-based. We're already eight months ahead of the pack."