Equipment Financing verses Leasing

Equipment Financing verses Leasing

What You Need to Know

When your business needs equipment but you don’t have the cash to buy it outright, you have two options: leasing or financing.

Quick Overview: Which Option is Right for You?

When it comes to deciding between a lease or a loan, focus on the particular piece of equipment you’re looking to obtain. If you need equipment that has a short shelf life, consider leasing.

If, on the other hand, this is a piece of equipment you plan on keeping for a long time, equipment financing will likely be a more particle choice. Not to mention, it gives your business another asset, which can be super helpful if you ever consider getting another loan or line of credit down the road.


How Equipment Leasing Works

When you’re leasing a piece of equipment, you’re essentially renting it the same way you might rent an apartment. It typically requires no money down and no collateral, so you’ll only be held responsible for the flat monthly payments for the duration of your lease agreement.

Once you’ve reached the end of the initial agreement, you’ll have the option to renew or terminate the lease–or to purchase the equipment for its Fair Market Value.

If  you’re a rapidly expanding business–or if you’re in a technology-driven field that has a high equipment turnover–equipment leasing may be a good solution for your business’s needs.


How Equipment Financing Works

If you’re looking to purchase something that’s less likely to need frequent updating—heavy machinery, for example–you may be more interested in seeking equipment financing so you can buy the item outright.

Equipment loans can be easier to qualify for, and the amount of money you’ll be eligible to borrow is based on the type of equipment you’re planning to purchase, and whether it’s used or new.

And because the equipment you’re purchasing can usually be used to secure the loan, it’s unlikely you’ll be asked to put up any additional collateral.


Benefits of Equipment Financing

  1. Less Documentation

With a more traditional loan, lenders want to see years of financial history and a decent credit score, among other documentation. With an equipment loan, on the other hand, lenders can be a little less concerned about your credit score and financial history–especially since the equipment you’re purchasing will be used to secure your loan.

  1. Tax Incentives

There are advantages to both leases and equipment loans. Tax incentives vary year to year. Your accountant is the best one to answer tax questions. Plus, all long and short term business goals come into play.



Benefits of Equipment Leasing

  1. Stay Current with Technology

If you’re in a technology-related field, it makes sense that your equipment should be the most cutting-edge… But it doesn’t make financial sense to continue replacing it every few years. If you find that you’re in constant need of equipment upgrades, leasing may be a better option than buying.

Since you’re not obligated to make a purchase at the end of your lease, you have the option to return an obsolete piece of equipment at the end of your contract and open a lease on something newer.

  1. Tax Incentives

Equipment leasing provides the same tax incentives as equipment financing.

One way Leap Kapital fills the financial gaps in business is with Master Lease


4 Responses

  1. I like that you explain how equipment leasing gives you the chance to have the pieces for an agreed amount of time at a flat monthly charge, making it a good option for an expanding business or one that is in a technology-driven field. This would be useful to ensure you only have what you need as long as you require, which could save you money on maintenance and purchasing new machinery. If a business is considering this, they’d probably want to determine what they need it for to figure out how long and what kind of technology they need so they can then research local companies to find one that offers what they require, such as one that specializes in construction equipment leasing, in order to make sure they can find a reliable supplier that has what they’re looking for and is available for the duration of their project.

  2. Julissa says:

    It works quite well for me

  3. This is really useful, thanks.

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