Equipment Finance, Lease versus Loan ??? Products & Leasing Services, Lease.

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Lease vs Loan What is the Difference ???

When you take on a loan, you borrow money to make a purchase. Leasing, from EquipmentFinanceSite.com on the other hand, is a term rental agreement for the use of specific equipment. As a means of financing, loans and leases have benefits and drawbacks. Below are some major considerations that will affect your equipment acquisition decisions.

Rates	Loan - Rates are usually floating and based on Prime Rate or another similar index such as LIBOR. As the index fluctuates, your monthly payment changes with it. This is beneficial during periods of falling interest rates and detrimental to your business when interest rates rise. Lease - Payments are generally fixed for the life of the lease unless the lease has special provisions. Leasing can provide business owners peace of mind, especially in times of rising rates.
Amount Financed	Loan - Banks generally only lend a portion (60%-80%) of the equipment cost; exclusive of soft costs such as shipping, training, installation, etc. Lease – We are able to finance the complete equipment acquisition which will often include soft costs, shipping, installation, training and sales tax. Out-of-pocket costs are usually limited to the first month's investment or a small security deposit.
Extra Costs	Loan - Banks use fees to boost their rates of return on loans. These fees include application fees, origination fees, commitment fees, schedule fees, funding fees. These fees are charged for expenses associated with approving and executing the loan application. Lease - In 99% of small-ticket equipment leases (up to $75,000) there are no origination, commitment or application fees. Documentation fees are minimal, ranging from $95 to $350 depending on the transaction size. In general, leasing provides more control over fees.
Available Terms	Loan - Banks tend to be somewhat less flexible than leasing companies. That's fine if you are looking for a standard term. But if you need more flexibility, you may be stuck with little or no options. Lease - In most cases, you have the option of choosing the term, the purchase option and the down payment for your equipment lease. We offer 60-month terms on most equipment and up to 72 months on some asset classes. Custom terms can easily be arranged depending on your needs and financial outlook.
Equipment Types	Loan -Banks won't finance equipment they don't understand or feel has limited collateral value. Because of this, many companies working in smaller industries or less mainstream industries can be shut out of the lending process.
Ease of application	Loan - Regardless of the amount requested, most banks won't begin to review your credit until you supply a full financial package based on their specific regulations. Lease - Our business goal is convenience. We are completely service-oriented. We know that your time is precious therefore we offer lease programs up to $150,000 without requiring financials. In most cases, we can approve your equipment lease based solely on a complete application. We’ve learned that what keeps us competitive almost always keeps our customers competitive too.
Speed	Loan - Banks are slow credit decision makers. It can take weeks to prepare your request and bring it to the credit committee for review. Lease – We know that time is of the essence when it comes to equipment acquisition. More than half of our approvals are issued the same or next business day.
Collateral	Loan - Banks usually secure their loans by requiring additional collateral such as real estate, equipment, inventory, receivables or even your home. In fact, it is common practice for banks to file a blanket lien against all of your personal and/or company’s assets. Lease - In most instances, the only collateral needed to finalize your lease is the equipment being leased.
Restrictive Covenants	Loan – Bank loans often require that the borrower maintain certain minimum financial ratios and report them to the bank on a quarterly or semi-annual basis. If the borrower fails to maintain those ratios, the bank can call the loan. They can also place restrictions on or limit future borrowings from any institution. Lease – Generally, leasing does not call for such restrictive covenants.

Many times, companies are not only weighing the options to lease their equipment versus borrowing money to purchase it. Often, they are also considering using their own cash to purchase the equipment they need. Below is a brief layout of often asked questions and answers that can help those faced with these choices.

Loan vs. Lease/Cash Comparison Chart:
Can I avoid a large cash outlay?	Cash – Responsible for 100% of Down Payment Loan – Often as much as 25% Lease – Often requires no down payment with 100% financing
How will it affect my bank credit line?	Cash – Impacts your balance sheet immediately Loan – Decreases credit line Lease – No money is borrowed
How will it affect my operating capital?	Cash – Highest up-front costs Loan – Down Payment is most often required Lease – Low front-end costs
What will my payments be like?	Cash – 100% needed now Loan – Payments may rise with interest rates Lease – Fixed payments with possible tax benefits*
Can I upgrade/add on easily?	Cash – No Loan – Re-application often required Lease – Yes. Your lease can even be structured ahead of time to account for this option.
Can I schedule payments to match my cash flow?	Cash – No Loan – No Lease – Yes. Leasing provides various payment options that will mean the difference between growing your business or losing it.

* Consult your tax and legal advisors for specific advice on the potential tax benefits of leasing for your company. We will always strive you provide you with the best options for your business but we strongly recommend that all options be reviewed with your tax advisor.

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Lease vs Loan What is the Difference ???

Loan vs. Lease/Cash Comparison Chart: