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Lease vs Loan: We Break it Down

You’ve worked hard to establish your business and make it grow. Now, you need to purchase new or additional equipment to move your business to the next level. Deciding what you want is your job. Our job is to help you navigate the options and determine the best financial solution for your purchase. We offer honest advice about the advantages and disadvantages of leases and loans and leave it up to you to decide what’s best for you.


A lease is a contract outlining the terms under which one party agrees to rent equipment owned by another party. It guarantees use of the equipment to a user (lessee) and guarantees the equipment owner (lessor) regular payments for a specified period in exchange.

A loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient incurs a debt and is usually liable to pay interest on that debt until it is repaid as well as to repay the principal amount borrowed.

Advantages and Disadvantages - Lease vs Loan

Lease Avantages:

  • Lower monthly payments typically spread out over the course of months or years
  • A significant down payment is usually not required
  • Equipment leases are often eligible for tax advantages
  • Allows for conservation of capital
  • Shorter approval process
  • Additional collateral is usually not needed

Loan Advantages:

  • Have title to the equipment
  • Can modify equipment to suit your needs
  • Business/owners can claim a tax deduction for a portion of the loan payment as interest and depreciation

Lease Disadvantages:

  • Cannot modify equipment without authorization from the lender
  • Do not hold title to the equipment

Loan Disadvantages:

  • Shorter repayment terms typically
  • May be more difficult to qualify
  • Lengthier approval process
  • Denied approval with a low credit score
  • Lengthy and more comprehensive paperwork
  • Usually requires specific collateral
  • Traditionally, start-ups are often denied
  • Usually requires a down payment
  • May need to pledge additional personal assets as collateral based on the credit profile

Call LFS today to discuss your equipment purchase options. We want to hear from you.