In today’s environment, businesses have multiple financing options to acquire equipment including high-interest rate credit cards, loans through a banking relationship, or cost-effective financing through a third-party company such as Americorp Financial.
While we promote equipment financing more, you may want to break down each financial product to your customers who cannot afford paying with cash. Both follow an approval process, but a lease/rental may fit their future needs better than a bank loan.
The financing company (lessor) owns the equipment (hold legal title) with the customer (lessee) having the option to upgrade, return or purchase the equipment at the end of the lease term.
Customer (borrower) holds the title to the equipment – bank only gets involved if customer defaults on loan payment. Cannot upgrade or return equipment. Customer owns once loan is paid off.
A true lease allows the customer to claim the entire lease payment as a tax deduction – which is the same on an annual basis. However, equipment financed under a conditional sale lease is treated as owned equipment. Please consult with your tax advisor.
The customer may claim a tax deduction for a portion of the loan payment as interest and for depreciation which is tied to IRS depreciation schedules.