When you are leasing a piece of equipment, you are primarily dealing it the same way you may rent an apartment. It usually needs no cash down and no collateral, thus you will only be held liable for the flat monthly payments for the period of your lease agreement.
Once you’ve reached the end of the initial agreement, you’ll have the choice to renew or terminate the lease–or to get the equipment for its fair market price.If you are a quickly increasing business–or if you’re in an exceedingly technology-driven field that features a high equipment turnover–equipment leasing is also an honest solution for your business’s needs.
Equipment loans are relatively easy to qualify for, and the amount of money you’ll be eligible to borrow is based on the type of equipment you’re planning to purchase, and whether it’s used or new.
Equipment loans are comparatively easy to qualify for, and therefore the amount of money you will be eligible to borrow is based on the kind of equipment you are planning to purchase, and whether or not it’s used or new.
And because the equipment you are getting will usually be used to secure the loan, it’s unlikely you will be asked to put up any additional collateral. These loans do, however, come with fixed interest rates between 8-30%–so, again, despite the fact that getting a loan could also be cheaper upfront. the amount of funding you may qualify for – and the rate of interest you’ll pay – depends on the worth of the equipment, your business history, and credit rating.
Benefits of Equipment Financing
- Less Documentation – With an equipment loan, lenders are less concerned about your credit score and financial history–especially since the equipment you’re purchasing will be used to secure your loan.
- You Don’t Have to Find Extra Money -If your business does not have additional cash on hand, taking out a loan may be a way of helping you get the equipment you need while not having to pay some of the direct costs of a purchase.
- Tax Incentives – The maximum annual tax deduction for those financing equipment is currently set at $500,000, which means, financing is often entirely tax deductible for small business owners.
Benefits of Equipment Leasing
- You Don’t Have to Find Extra Money -A lease permits you to rent a piece of equipment that you just cannot afford to buy outright. you often won’t be required to make any direct payments, and the monthly rate is typically lower than what you’d see attached to a business loan or line of credit.
- Stay Current With Technology – If you find that you’re in constant need of equipment upgrades, leasing may be a better option than buying.
- Cash Flow Flexibility – Since a lease doesn’t typically require a down payment, you’ll have more cash on hand to pay bills, make payroll, and purchase inventory.