Equipment Leasing & Financing

When your company needs to purchase equipment, but doesn’t have the cash on hand to purchase it outright, there are 2 options, equipment financing and equipment leasing. Both options will provide you with the equipment, but which one is a better option for your company?

How Equipment Financing Works

Equipment financing works best when you are looking to purchase a piece of equipment that you will be using for a long period of time and requires less frequent updating. This will allow your company to purchase the equipment outright. Equipment financing is relatively simple to qualify for, and the dollar amount that you will be eligible to borrow will be based on the type of equipment you’re planning to purchase, and whether it is used or new. The equipment you are purchasing can usually be used to secure the loan, it’s unlikely that any additional collateral will be required. These loans will come with fixed interest rates between 8% and 30% which will be more affordable upfront but cost you more in the long run.
Also keep in mind that when purchasing the equipment, even if what you purchase becomes obsolete, the loan won’t be affected and you may be paying for a piece of equipment that no longer has any use for your company.

Benefits of Equipment Financing

1. Less Documentation
2. If you don’t have the cash to purchase equipment outright
3. Tax Incentives

Benefits of Equipment Leasing

      1.  You don’t need to find extra money
Leasing equipment allows you to rent a piece of equipment that you cannot afford to purchase outright. Most of the time you will not be required to make any down payments, and the monthly payment will typically be lower than a business loan or line of credit.

      2.  Keeping up with Technology

Leasing is a great option if the equipment you are looking to purchase becomes obsolete every couple of years when a newer make and model comes out. It makes no sense to finance a piece of equipment that only has a few years of usability for your company. This works exactly like a car lease where you can trade the equipment in for a newer model at the end of the lease. There is usually no requirement to purchase the equipment at the end of the lease.

      3.  Doesn’t Hurt Cash Flow

Cash flow is the life-blood of your business. If cash flow is tight then leasing the equipment is a great option because typically there will be no upfront payment and you will be able to use your cash on hand to pay bills, payroll and purchase inventory.

      4.  Tax Incentives

Equipment leasing provides the same tax incentives as equipment financing.

Which Option is Right For You?

When it comes to deciding between a lease and a loan, consider what kind of equipment you are looking to acquire. Equipment that becomes obsolete every few years or updates is a great option for leasing.

If the equipment will be used long term such as a pizza oven then go for financing. The other benefit is that you now have an asset that can be used to secure a line of credit or business loan.

What you will need to Qualify

• 4+ months in business
• 650+ credit score
• $15,000 + in monthly revenue