Equipment Leasing vs. Equipment Loans

Financing equipment for your business is a crucial decision. Is it better to lease or take out a loan and buy it outright?

Financing requires at least a down payment that is 10-20% of the value of the equipment, which takes cash away from other vital things and reduces your available line of credit. On the other hand, leasing requires an initial outlay of 1%. Also, payments for leasing can be smaller and spread over a larger period of time.

Leasing also means you do not necessarily have to keep the equipment, as opposed to a loan. It's much easier to replace equipment once it is obsolete under a leasing arrangement than if you own it.

There are also tax advantages. The IRS treats an operating lease as a tax deductible overhead expense rather than a purchase, thus 100% of lease payments are tax deductible. Also, since a lease is not considered a long-term debt, it does not appear on the company's balance sheet as such, improving financial health.

Leasing gives your business valuable flexibility as you position yourself in the marketplace.

Find great information on financing solutions here.