By The Leasing Group

Equipment Financing: Five advantages of a lease vs. a loan

Years ago, the word “lease” brought to mind something you could basically pay to borrow or “rent” for a year, or two, or five. As a consumer, you can still rent furniture, appliances, and cars for a set period of time, then turn the equipment in at the end of the lease. You never owned it. You simply used it for awhile.

Today, in the world of business equipment leasing, a lease looks very much the same as a traditional loan. You don’t turn in the backhoe or dental chair at the end of the term. You take possession of the equipment from the get-go, and it’s yours for keeps.

When it comes down to the details, however, there are some distinct advantages of lease financing over a traditional loan. Here are a few:

1. In a lease, you can obtain 100 percent financing, including sales tax, if you need it. In a traditional loan, you might be required to put 20 percent down. For a $100,000 dump truck, that would translate to $20,000. Many businesses might not have that kind of cash lying around.

2. While a loan has many of the same options that a lease does, most banks don’t take advantage of them. For example, loan documents can be written to skip payments or create a variable payment structure, but they rarely do. However, it’s very common for lease documents to include this variable payment language. If you need payment flexibility, a lease is probably the way to go.

3. Both a lease and a loan require some form of collateral or security. A lease is typically secured only by the lease equipment. However, if you have taken out a traditional loan, you could end up with a lien on not only the equipment, but against other business assets as well.

4. Late payments aren’t as big of a hassle in a lease. If a payment is made late during the term of a lease, there is usually a grace period after the due date, and then only a flat-fee penalty is assessed. In a loan, interest accrues for every day your payment is late, with no grace period. You also might pay penalties at the end of the loan term.

5. With a lease, a business can enlist The Leasing Group to pay vendors and coordinate equipment delivery. The funds are released by The Leasing Group to pay for the equipment on your behalf. With a loan, you would be responsible for obtaining the funds, paying your vendors, and arranging delivery details. Our services can be especially helpful when you’re dealing with several vendors. (Click here to read an article on the benefits of bundling leases from multiple vendors.) In some cases, The Leasing Group can also get vendors to waive a required down payment, because of our solid reputation.

As you can see, a lease today functions much like loan, just with greater flexibility, and in some cases, more favorable terms. Give us a call at (502) 547-2773 to find out how we can help you secure equipment lease financing.