| Leasing vs Loans |
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LEASING vs LOANS 1. RATES Loan – Rates are usually floating and based on Prime Rate. Lease – Payments are generally fixed for the life of the lease. Advantage: Leasing 2. AMOUNT FINANCED Loan - Banks generally lend a portion (60%-80%) of the equipment cost; exclusive of soft costs such as shipping, training, installation, etc. Lease - Able to finance the complete purchase including soft costs and sales tax. Advantage: Leasing 3. EXTRA COSTS Loan - Banks use fees to boost their rates of return on loans, including application fees, origination fees, commitment fees, schedule fees, funding fees and charges for expenses. Lease - In 99% of small-ticket equipment leases (up to $150,000) there are no origination, commitment or application fees. Advantage: Leasing 4. AVAILABLE TERMS Loan - Banks tend to be somewhat less flexible. Lease - In most cases you choose the terms, purchase option. Advantage: Leasing 5. EQUIPMENT TYPES Loan - Banks won't finance equipment they don't understand or feel has limited collateral value. Lease - Our funding capabilities ensures we will finance virtually any equipment that generates income for your business. Advantage: Leasing 6. APPLICATION INFO NEEDED Loan - Full financial package. Lease - One page application. Advantage: Leasing 7. TIME FRAME Loan - Banks are historically slow in making credit decisions. Lease - Approval within days. Advantage: Leasing 8. COLLATERAL Loan - Banks usually secure their loans by requiring additional collateral such as real estate, equipment, inventory, or receivables. Lease - In most instances, the only collateral is the equipment being leased. Advantage: Leasing 9. RESTRICTIVE COVENANTS Loan- Bank loans often require that the borrower maintain certain minimum financial ratios and report them to the bank on a quarterly basis. Lease - There are no restrictive covenants. Advantage: Leasing 10. DOWN PAYMENT Loan - A loan requires the end user to invest a down payment in the equipment. Lease - A lease requires no down payment and finances only the value of the equipment Advantage: Leasing 11. TAX ADVANTAGES Loan - End users may claim a tax deduction for a portion of the loan payment as interest and for depreciation which is tied to IRS. Lease - When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. Advantage: Leasing
12. COMMON SENSE FACTOR “Lease – (Rent to own) always lease equipment that depreciates in value” Advantage: Leasing
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