Leasing vs Loans PDF Print E-mail

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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    

 

Diamond Financial Services

262 Highway 36  West Keansburg, NJ 07734

732-787-9191 or 877-508-2274 Toll free  732-495-7058 fax

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