Are All Equipment Leasing Options the Same?

There are many ways to get an equipment lease for your business. You can approach trustworthy alternative lenders or request financing via the equipment seller. However, not all equipment leasing programs are made equal. It’s important to consider several factors when selecting your leasing partner, lease terms and monthly payments.

When Is Equipment Leasing a Good Investment?

Some business owners swear by equipment loans, telling you that leasing is more expensive. It’s true that loans have lower interest rates, but that doesn’t mean they’re automatically a better fit for your business. Many small business owners prefer leasing for several reasons.

To Save Money Each Month

One benefit of leasing is that you generally get lower monthly payments. Even though you pay more in interest over the long run, if your business needs working capital, having lower payments can make leasing a better choice.

To Upgrade More Frequently

Loans involve purchasing equipment. You own it for good, meaning that you have to foot the bill when it comes time for upgrades. With items such as heavy machinery, ownership is a plus.

For technology and other equipment that becomes outdated quickly, leasing is more flexible. You can get a brand-new model every few years, staying ahead of competitors.

To Keep Your Financing Options Open

Do your long-term plans include real estate projects? Does your business require taking out loans for inventory purchases? In those cases, leasing is generally a better fit when it comes to inventory. Getting approved for a loan is difficult if you already have another loan, but a lease doesn’t affect your ability to qualify.

To Enjoy Long-Term Tax Benefits

You can deduct certain costs related to equipment leasing and equipment loans from your taxes. Loans are more complex in tax terms, however. Leases allow you to continue claiming deductions throughout the lease period.

What Types of Equipment Leases Are Available?

An operating lease is similar to a rental agreement. After the end of the lease period, you return the equipment. This frees you to lease a different piece of equipment.

There are also capital leases, which include a purchase option at the end of the lease. These programs are for companies that want to purchase machinery but can’t afford the larger payments associated with a loan. Capital leases stretch payments out longer for high-quality equipment.