Leasing vs Loans

The Difference Between 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

    1. 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

    1. 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

    1. AVAILABLE TERMS

                    Loan – Banks tend to be somewhat less flexible.

    Lease – In most cases you choose the terms, purchase option.

    Advantage: Leasing

    1. 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

    1. APPLICATION INFO NEEDED

    Loan – Full financial package.

    Lease – One page application.

    Advantage: Leasing

    1. TIME FRAME

    Loan – Banks are historically slow in making credit decisions.

    Lease – Approval within days.

    Advantage: Leasing

    1. 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

    1. 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

    1. 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

    1. 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

     

    1. 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

    [email protected]         www.franchiseleasing.com

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