A lease usually entails no down payment and finances the depreciation of the equipment over the term of the lease. The borrower sometimes has the option to buy the equipment at fair market value when the lease term is up. A loan usually requires some form of down payment then finances the remaining amount. With a lease, the equipment itself is used as collateral to secure the transaction. A loan requires a separate asset to be pledged as collateral. To be competitive today you must be able to move quickly, produce a quality product, and meet demanding delivery schedules. While a lease can address these needs, a traditional or non-traditional loan may still be the better way to go.
Some of the problems with leasing
- Provides less control over the equipment since you are not the owner
- Involves a partnering relationship with its related risks
- Is generally more complicated than an outright purchase
Some of the benefits to a loan
- You enjoy the benefits of ownership and the future flexibility to utilize accrued equity to leverage working capital when needed
- Industrial equipment is not as threatened by obsolescence as equipment
in industries such as technology or medical
- Purchasing may allow you to deduct up to $24,000 worth of equipment
in the year it is purchased as part of "first-year expensing"
We can help you find the type of funding that matches the needs of your growing business.