Easy guide to equipment leasing and loans

Leasing and financing are two different ways of obtaining finance to get new capital equipment.

What is Equipment Leasing?

In this type of financing, the lesser hands over the capital equipment to you, but you don’t get the ownership title.

You are free to use the leased asset to run your business provided that you make regular monthly payments.

The lease amount in total is often significantly higher than the purchase value of the equipment. Plus you don’t have any ownership at the end of the lease term. There may be an option to buy the equipment at the fair market value. But remember that you get to enjoy almost all the benefits that a true owner enjoys. That’s because you have permission to use the leased asset for your business during the lease term.

Although it may sound like a bad deal, it is a good financial solution for businesses which require capital equipment that quickly becomes obsolete. In fact, leasing is a great technique for countering the risks and subsequent losses of obsolescence because you can upgrade to new equipment any time your current equipment becomes obsolete.

In fact, it is extremely beneficial for your working capital as compared to upfront payment.

An upfront payment may freeze your business operations because your working capital is significantly reduced in an instant. This will result in many problems like lost earnings, failure to pay creditors on time, bad credit rating, etc.

A lease on the other hand will not bring your business operations to a halt because working capital is not significantly reduced in the same way as an upfront payment. Since you have to make much smaller regular payments, leases are rather gentle on your working capital. Hence you won’t witness a significant reduction in business operations meaning that your earnings won’t plummet. In fact, your earnings may surge because your business will enjoy the benefits of your new capital equipment.

What Is an Equipment Loan?

It basically involves obtaining a loan from the lender in order to purchase an asset. This asset is then pledged as security for the loan.

One major advantage to this method is that you get to enjoy the same benefits as an owner. Of course, when you complete all of your loan payments, you become the full owner of the asset.

As with leases, this method of financing does not drastically reduce your working capital as an upfront payment does. Therefore, you get to enjoy all the benefits of high working capital, plus your business earnings will increase because of benefits obtained from the new asset.

This type of financing is more useful if your asset is not going to become obsolete quickly and you want complete ownership rights.

While SMEs face enormous problems getting bank loans, obtaining an equipment loan is relatively easier because the asset thus obtained serves as collateral. Hence, the lender knows that his loan is fully secure. Lenders are more willing to extend equipment loans because the equipment serves as security for the loan.

Whether you are interested in equipment lease or loan we can approve your application even if your credit score has fallen. We have some of the fastest approval times, support start-ups and allow lenient repayment terms.

Contact us today for more information

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Telephone:    (347) 755-2257

Email:            info@klbbusinessfunding.com