Deciding Between Equipment Leasing and Financing

No matter what type of business you run, it stands to reason you require some kind of equipment in order to maintain daily operations. While this might be true, it doesn’t change the fact that most machinery costs a small fortune. Whether you’re looking to upgrade your current equipment because it is outdated or you need to replace a machine that has broken down, finding the available funds isn’t always so simple. Luckily, options like financing and equipment leasing can prove advantageous. Take a look at these tips to pick the right fit for your needs.

Understanding Equipment Financing

Equipment financing is a process that involves taking out a loan of some variety in order to pay for the cost of the machinery. Usually, this will involve a line of credit. You will provide financial information to a lender including your credit rating and some form of the asset as collateral. Based on the value of the asset, you will be issued a credit line of a particular amount. After you’ve been approved for the line of credit, you can use it to buy whatever equipment you might need for your business.

Understanding Equipment Leasing

Though similar in name, equipment leasing is slightly different than the financing option. In this scenario, the equipment itself acts as the collateral needed for the service. You will be renting the equipment under the terms of this agreement, meaning you are paying a monthly fee to have it in your possession. At the end of the lease, you will be given the option of ending or extending the contract. You may also want to purchase the equipment when the lease ends, but this will be entirely dependent on what your long-term plans are.

Making the Right Choice

Determining which option is the right fit for your business comes down to weighing out the pros and cons of each service. If you’re unsure of what equipment you will require, then taking out a line of credit can help. Conversely, you may wish to lease if you are looking to spread payments for a particular piece of machinery out over a period of time. Either way, both options can prove useful depending on the unique circumstances of your business and your current financial situation.

When it comes to finding the right financial services for your business, you need to think about all of the options available to you. Compare how equipment leasing and financing work and figure out the perfect fit for your needs.


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