Virtually all businesses rely on some form of equipment, meaning they need a way to pay for said equipment. This may sound like a challenge, especially for newer businesses without much cash on hand; however, equipment leasing and financing can each help. Keep reading to learn more about the two and when each is appropriate.
Timing comes into play when deciding between equipment leasing and financing—that is, essentially renting equipment (in the case of leasing) versus taking out a loan to purchase it permanently (in the case of financing). Finance blogger Alyyah Camp writes that loans involve negotiations, which can take up time. In some cases, though, leases may be provided rapidly and directly from the manufacturer, often allowing for quicker agreements.
At the end of a lease, the lessee typically has an option to renew the lease or relinquish the equipment, but unless the agreement was a lease-to-own arrangement, the lessee will not own the equipment. (In many leasing arrangements, the lessee also won’t be responsible for reasonable maintenance costs.)
By contrast, financing allows the borrower to gain ownership of the equipment. One isn’t necessarily better than the other. In general, equipment that will need to be upgraded by the end of the lease is a good candidate for equipment leasing. By contrast, financing is a strong option for equipment that has a long usable life—that is, equipment that remains up-to-date and operational past the end of the loan’s repayment period.
Because equipment leasing arrangements involve the lease provider retaining ownership of the equipment, they may place certain restrictions on how it is used. This won’t be a problem as long as the restrictions are reasonable, but you should check into this before signing on for a lease. Financing, meanwhile, gives your business total control over the equipment’s use.
Whether you’re interested in getting equipment or have another business need, Coastal Commercial Lending is eager to help. To learn more about our offerings, just get in touch!