When the time comes to find a financial institution that provides equipment financing, comparing multiple options and programs is a must.
It is important to locate a reliable lender that is known for providing stable and competitive financing options to companies of all sizes spanning a variety of industries.
Some companies have been involved with equipment financing for many years, while others are getting involved for the first time. Either way, relying on the assistance of an experienced and knowledgeable lender makes the process less stressful.
Generally speaking, there is a lender out there for every type of equipment financing. No matter what you need to purchase or lease for your business, you can find a lender that is more than willing to customize a plan to match your every need. However, some industries are more commonly serviced than others. These include:
- Information technology
Regardless of what you decide to do, before making a final decision you should better understand the benefits of both equipment leases and loans. There are pros and cons of each option, so focusing on the details will help make for an easier decision.
Three Types of Leases
A growing number of companies have come to realize that leasing equipment is often times better than taking out a loan to make a more traditional purchase. Before you decide for or against this, here are the three types of leases to become familiar with:
- Tax lease – this is the most traditional type of lease, giving clients the ability to renew, purchase, or return the equipment when the lease comes to an end.
- Terminal rental adjustment clause lease – this is similar to a tax lease, but is used for titled motor vehicles.
- Synthetic lease – this is an ideal solution for high value, long lasting equipment. This type of lease offers 100 percent financing with either a fixed or floating rate.
Note: these are three commonly used terms to describe each type of lease, however, different lenders use different terminology.
Benefits of Leasing Equipment
The final decision on whether to lease or rely on another type of financing ultimately rests on the company and what they are most comfortable with. For those who are having a difficult time deciding, here are several benefits of leasing:
- The ability to always have the most modern equipment, giving you the chance to improve your business and stay one step ahead of the competition
- Allows you to have a more consistent budget
- Options when the lease runs out, including buying the equipment or returning it
Traditional Equipment Loan
For those who are not interested in leasing, the ability to secure an equipment financing loan is available.
This is similar to any other type of bank loan in which you complete an application, are provided with a particular amount of money, and agree to the repayment terms and conditions.
Unlike a lease, with a traditional loan the client owns the equipment. Once the equipment is paid in full, the client owns it outright and no longer has to make monthly payments. This is one of the biggest benefits when compared to leasing.
Questions to Answer
When comparing equipment financing options, answer the following questions:
- Are you interested in upgrading to the most modern equipment every few years?
- Do you have the desire to own your equipment outright at some point in time?
- What would the monthly payment be for a lease and traditional purchase?
By answering these questions, you will have a better idea of where to start and how to move forward with the equipment financing process.
From a variety of lease options to a traditional loan, how you move forward with equipment financing should be based on your findings, industry, and financial position.