Leasing vs Loans

1. 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

262 Highway 36  West Keansburg, NJ 07734

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

[email protected]         www.franchiseleasing.com