Leasing AV Systems Can Appeal to Church Buyers

Jan 5, 2006 8:00 AM

Creating the best possible technical solution to the needs of a house of worship is often just part of the challenge in marketing audiovisual systems in this major market segment. Helping the client pay for the new system in the most logical and effective way is also a critical element.

Today, both mainstream commercial customers and clients in worship venues often look at leasing as a practical way to finance major investments in audio and video systems. Often, church buyers are especially drawn by the advantages of a well-structured lease.

Jennifer Blumberg, senior vice president of sales at Audio Visual Innovations in Tampa, Fla., says church customers are often particularly interested in leasing options, for the simple reason that their funds are frequently under the most pressure. “Churches and small businesses tend to have the least capital,” Blumberg says.

Conserving capital is one of the traditional reasons to consider a lease in lieu of an outright purchase of equipment. Generally, purchases require a down payment or some investment of the buyer’s own equity in the new system, whereas a lease can often be configured to minimize or avoid these up-front costs.

In addition, leasing offers an opportunity to treat spending on AV systems as a current-year business expense rather than a longer-term capital investment.

“If a company can structure a deal that qualifies as an operating lease versus a capital lease, it gets different treatment when reporting financial results, and that can impact their decision,” says John Babcock, general manager of SPL Integrated Solutions in St. Paul, Minn.

“I think the client’s view on keeping up with technology, capital structure, tax situation, and its overall policy toward capital expenditures play significant parts,” he adds.

Hedging against obsolescence is often cited as a big plus for leasing. “We recently worked a multimillion dollar contract with a large customer who utilized a third-party leasing company to finance the deal,” says Babcock. “Their approach to technology is to refresh every three years, and then the leasing company owns the old equipment.”

This strategy is less compelling these days than it used to be, notes Blumberg. “You’d almost have to sign a one-year lease to really protect yourself against obsolescence, the technology changes so quickly,” she says.

Both Babcock and Blumberg say that lease transactions account for a relatively small portion of their business, but are sometimes an ideal solution. In many cases, the AV integrator works with a third-party financial company to deliver the lease. Sometimes this leasing provider has been pre-selected by the client, and it’s simply up to the integrator to perform “due diligence” and assure that the transaction is on a sound financial footing, Blumberg says.

Again, churches can emerge as ideal candidates for leasing because they so often fall into the middle range between the largest and smallest customers. At the low end of the market, individual orders are so small that leasing rarely makes sense, while customers at the high end often have ample resources of their own to finance their purchases.

For the integrator, the advantages of leasing can include assurance of prompt payment for equipment and systems delivered.