Lease vs. Loan

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.

Equipment Ownership:

Lease:

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.

Loan:

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.

Collateral Requirements

Lease:

The equipment serves as the collateral on the transaction.

Loan:

Based on credit review, customer may have to pledge current or fixed assets for collateral, which can be seized in the event of a default.

Down Payment

Lease:

Americorp Financial typically has no down payment required, and based on credit approval, may allow deferred payments for an approved time period.

Loan:

Typically, a down payment is required based on the credit review.

Depreciation

Lease:

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.

Loan:

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.

Payment Terms

Lease:

The customer pays a fixed monthly lease/rental payment based on their lease/rental agreement.

Loan:

The customer pays for the loan with interest over a specific period of time.

Eligible Assets

Lease:

Leases can finance equipment, software, delivery, installation, maintenance, training, testing and other services.

Loan:

Loan pay for capital needs including sales finance, inventory finance and business expansion.