Business owners should be very familiar with the differences between equipment lease and equipment finance. Their place of business will likely require computers, HVAC units, kitchen supplies, and many other equipment expenses. Acquiring these supplies can be quite costly, which when the decision between equipment leasing and financing comes in. Although leasing and financing have some similarities, there is one major difference between the two. It all comes down to ownership.

The Definitions

Equipment leasing allows a business to rent equipment from a vendor through monthly payments, but businesses do not ever own the equipment. When financing business equipment, businesses are able to purchase a piece of the equipment. By the end of financing, once the equipment is paid off, the business will own it. Their definitions show the main difference between the two, but there are other factors that set them apart from other than ownership.

Application Processes

One of the main differences between the two is the application process. When it comes to leasing the equipment, it is a very easy application. When applying, there will likely be no need to show a large amount of financial paperwork. There are also options for businesses with bad credit for leasing equipment. The difference in financing business equipment is the type of loan that is taken out. Financing equipment requires a business to get a loan for money to buy the equipment, rather than having the equipment loaned to them. It might also require a down payment.

The Equipment

Much of the time, different types of equipment will be better off being either leased or financed. Usually, businesses would be better off leasing equipment that won’t become easily outdated. This kind of equipment is usually a conveyer belt, computers, or other machinery that will easily lose its value over time. Financed equipment will usually be the kind that will not use its value over a few years. Typically businesses will finance tractors, trucks, or furniture. When financing the equipment, the business is stuck with it.

Good for Business

When choosing between leased and financed equipment, it all depends on what would be good for business. If having the newest and latest type of equipment will keep a business thriving, it would be better to lease the equipment. If a business would be better off purchasing a sturdy piece of equipment that will last years and keep its value, then they should stick with financing. Before making the decision, it’s important to weigh out the pros and cons of each option. It all depends on where a business stands financially and what they can afford.