Equipment Loans Vs.Leasing

(What's the difference?)

1Should You Borrow Money FromYour Bank to Finance Equipment?

Often, a loan from your bank is oneof the least expensive ways to

finance equipment

Often, a loan from your bank is oneof the least expensive ways to

finance equipment

(If you can qualify....)

There are some drawbacks to bankfinancing though...

Mountains of paperwork...

Low approval rates...

Loan covenants can restrict borrowing...

Not as tax efficient as a lease

2Non-bank Equipment Loans

You'll Hear Several Names Used toDescribe an Equipment Loan

Equipment Finance Agreement (EFA)

Capital Lease

Finance Lease

$1 Buyout Lease

They all mean the same thing...

After the last payment - you'll own theequipment (for a final payment of $1)

There are some advantages toloans versus leases...

No balloon payments

Immediately write the entire purchase priceof your equipment off your taxes

Easier to qualify for than bank financingwith much less paperwork

Much faster than working through yourbank

There are some disadvantagestoo...

You'll usually save a lot more intaxes by doing a lease

Payments are usually higher thanon a lease or a bank loan

2Equipment Leases

Leasing has lower payments thanthe typical equipment loan

At the end of the term, it's yourchoice whether to buy theequipment or return it

If you want to keep the equipmentat the end, you'll have to pay fairmarket value of the equipment

(FMV)

The largest advantage to leasing istaxation

You may usually write the entirepayments off as operating

expenses

The largest disadvantage toleasing is the residual

You'll have to make a balloonpayment at the end if you choose

to keep the equipment

Learn More About How an FMV LeaseWorks

To Read More about how FMVLease Buyout Options Work...

CLICK HERE