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Lease vs. Loan

Leases are 100% financing. Sometimes additional expenses such as freight, installation and training can be included in a lease as well. Loans often require a 20% deposit with little or no soft costs included.

Leases do not contain restrictive financial covenants like bank loans do. If a borrower violates one of these covenants, the lender has the right to demand full payment.

Leases have fixed rates. Loans sometimes have adjustable rates. With today’s interest rates steadily increasing, now is the time to lock in a low rate.

Leases can be structured to allow the entire lease payment to be expensed. Loans allow for the deduction of the interest portion of the payment only.

Leases can be structured to be off balance sheet financing which can improve financial ratios. Loans require that the equipment be listed as an asset on the balance sheet with a corresponding liability.

Leases provide more flexibility with the structuring of payments and end of lease purchase options. For example, custom structures can include seasonal payments, deferred payments or step up payments.