Buy vs. Lease

Purchasing loans are fairly straightforward. The lender evaluates the value of the incoming equipment and offers a percentage of that value to the business. The funds can then be put toward the acquisition. However, buying new equipment isn’t always the best option. In many cases, leasing equipment relieves the business of responsibility for maintenance and repairs while providing access to advanced technologies through a low monthly payment.

Equipment Sale Leaseback

If the business already has equipment in place, but needs cash, that equipment can be sold and leased back from the buyer. In most cases, transfer of the equipment to the buyer is not required, allowing the business to keep it in place and working. The buyer of the equipment pays a lump sum to the business for the value of the equipment. Then, the business makes payments back to the new equipment owner for its use.

Equipment Refinance

Another way to free up cash is by refinancing an existing equipment loan. Take advantage of lower interest rates and favorable terms offered with a new loan. The new loan can replace the old one so that the business pays less each month. The old loan payoff will reflect well on the business’s credit history.

Loan Highlights

• Equipment loans are specialized loans based on the value of equipment. 
• Equipment can be purchased, leased, sold and leased back, and refinanced. 
• Many kinds of equipment can be financed, including computers, medical equipment and industrial kitchens, among many others. 
• Leased equipment reduces the responsibility of repairs and upgrades on the business. 

Benefits

• Equipment loans are leveraged against the equipment itself, reducing risk to other business assets. 
• Refinancing can lower interest rates and monthly payments. 
• A business can secure new equipment without a huge upfront cost. 
• Because loans are often secured against the equipment, often loans rely more on cash flow and ability to pay than credit history.  

Challenges

• If purchased equipment breaks down, the business could end up paying on a loan for equipment it’s not using. 
• Leased equipment cannot be counted as a company asset on financial records.  
• If the owner of leased equipment decides not to renew the lease, they can take the equipment, leaving the business with reduced capacity. 
• Refinancing requires entering into a new financial agreement and a fresh credit verification.