equipment financing is done either by leasing or the
traditional loan. Every business should to consider
the advantages and disadvantages of each in light of their
own specific circumstances.
With a loan, the
borrower pays principal and interest over the term of the
loan, and own the equipment outright at the end. One advantage
of that is that legally, the equipment is considered
a legal asset to the business at the outset and can be used
as collateral to borrow against. However, a loan may incur a
substantial down payment. Also the equipment lifecycle may
make ownership itself a disadvantage if it's likely to be
obsolete at the end of the term.
offers more flexible payment options, depending of the terms
and what type of lease is contracted. There are two general
classifications of lease: the capital lease, more like the
traditional loan with ownership ($1.00 buyout) at
the end, and the operating lease, which is more like renting
the equipment for the specified time, with an ending option to
purchase the equipment for fair market value or simply walk away.
Tax wise, an operating lease is expensed like rent,
electricity, etc. It has the added advantage of paying
less per month if ownership takes a back seat to cash flow.
Leases are completely tax deductable (as opposed to interest only for
loans). They also more flexible when it it's time to upgrade or
trade up. They maximize cash flow, especially without a
substantial down payment. However, the overall suitability
in your situation of leasing over a loan must take many
things into account before committing to one or the other.
Machinery Equipment Financing is your advocate. With
eighty years of combined experience in equipment and
finance, we have the connections and the
knowledge to find the exact financing unique to help your
An excellent overview on business lending is
Equipment Financing, Equipment
Leading, Equipment Loans Guide.
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