Compare equipment loans vs. leases | Convenience, control, flexibility

Compare equipment financing loans vs. leases

Loan or lease? Find out which could be a better value for your business.

Business owners face many types of decisions. What type of financing you should get could be a tough one, especially when you need new equipment. Let us help you determine what may work best for you when acquiring new equipment.

Instead of buying equipment as a single expense, many companies choose to make smaller payments on equipment over time. This means either gradually taking ownership of a piece of equipment through a loan or using the equipment for a limited time through a lease agreement. If you don’t have the revenue or the need to purchase expensive equipment outright, either of these methods could boost your business’s efficiency and cash flow.

OnDeck Small Business Loans

OnDeck Small Business Loans

Among the largest online business lenders offering term loans and lines of credit at competitive fixed rates.

  • Minimum Amount: $5,000
  • Maximum Amount: $500,000
  • Loan Term: 3 to 36 months
  • Simple online application process with fast decisions
  • Dedicated loan specialists and loyalty benefits
  • Must have been in business for at least one year with annual revenue of $100,000+
  • Must have a personal credit score of 500+

    How do equipment loans compare to equipment leases?

    LoanLease
    ConvenienceA loan relies on a lender’s willingness to provide funding, with negotiations necessary to establish rates, deposits and secured assets.With no need to bother the banks, leases can be more convenient than a loan. If you know what you want and where to find it, you may be able to reach an agreement quickly.
    ControlDuring the process of buying the equipment, you have control over how and where the equipment is used.The company providing the lease keeps ownership of the equipment. This could result in restrictions on its use.
    FlexibilityShould you discover that you no longer need the equipment, you will still need to make repayments until you fully pay off the loan.In most cases, you can choose whether to buy the equipment at the end of the lease period, after the principal of the loan is fully paid.

    Equipment financing loans

    Like other business loans, equipment loans are financed by banks and lenders. This means that potential lenders will scrutinize both your personal credit report and your business credit report before extending an offer. Because the lender wants to trust that you’ll meet your repayments, your business’s revenue and cash flow will also be evaluated.

    What costs should I expect with an equipment loan?

    • Regular installments. Repayments are typically charged monthly, quarterly or annually at an agreed interest rate.
    • Money down. Though terms vary by lender, you could be required to put down around 20% of the amount you’re requesting.
    • Trade-ins. Though not as common, a lender may ask to secure your loan with the items you’re purchasing or other assets, depending on your credit score and the value of the equipment.

    Business lenders to consider for equipment loans

    Rates last updated April 21st, 2018
    Name Product Product Description Min Loan Amount Maximum Loan Amount Requirements
    LoanBuilder, A PayPal Service Business Loans
    Customizable loans for business owners in a hurry with no hidden fees.
    $5,000
    $500,000
    Annual business revenue of at least $100,000, at least 1 year in business, personal credit score of 600+.
    LendingTree Business Loans
    Compare multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    National Business Capital Business Loans
    Get a large business loan to cover your financing needs, no matter what the purpose is. Startups welcome with 680+ credit score.
    $10,000
    $5,000,000
    Your company must have been in business for at least 6 months and have an annual revenue of at least $180,000.
    Excel Capital Management Small Business Loans
    Get personalized financing options that suit your unique business needs in just a few simple steps.
    Varies by loan type
    Varies by loan type
    Your business must operate in the US, be at least 1 year old and have monthly revenue of $15,000+.
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    Must have been in business for at least one year with annual revenue of $100K+. Must have a personal credit score of 500+.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    $2,000
    $250,000
    Must have been in business for at least 1 year. Revenue minimum is $50,000 annually or $4,200 per month over the last 3 months.
    Fora Financial Business Loans
    $5,000
    $500,000
    Business age 6+ months. Monthly revenue $12,000+. No open bankruptcies.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    2+ years in business; $50,000+ in yearly sales; No bankruptcies or tax liens; At least 20% ownership of your business; Fair or better personal credit
    SmartBiz SBA Loans
    Get funding for your small business with a government-backed loan and extended repayment terms.
    $30,000
    $5,000,000
    Personal credit score of 650+; US citizen or permanent resident; Business must be 2+ years old; Annual revenue of $50,000+; No outstanding tax liens; No bankruptcies or foreclosures in past 3 years.

    Compare up to 4 providers

    Equipment financing leases

    Rather than deal with a bank or lending service, you can sometimes organize a lease directly with the equipment provider. Leases may not rely heavily on your credit report or require secured assets. Another plus is that payments are typically tax-deductible.

    What costs should I expect with an equipment lease?

    • No deposit. As you won’t own the equipment, leases tend to require no deposit — just a minimal upfront cost.
    • Predictable payments. You’ll make fixed monthly payments on your lease.
    • Fair market value. At the end of the lease term, you may have the option to renew or terminate the lease or buy the equipment outright at its fair market value.

    Which financing option offers better value?

    If you plan to use the equipment for a long time and have access to a consistent cash flow, a loan could be more convenient for your business. Leasing can be better suited to companies with lower revenue and those seeking equipment that comes with a shorter lifespan.

    Short-term leases allow for expensive equipment to be upgraded every few years, with some agreements requiring that the provider update products regularly within the lease period.

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