Lease vs. Loan

In the simplest terms, a loan is the borrowing of money, while a lease is a rental agreement for the use of specific equipment. As financing vehicles, loans and leases both have their benefits and their drawbacks. Here are some key issues that may affect your decision:

LoanLease
Rates Rates are usually floating and based on Prime Rate or some other index such as LIBOR.  As the index fluctuates, so does your monthly payment.  This is good during periods of falling interest rates, bad when interest rates rise. Payments are generally fixed for the life of the lease unless your lease has special provisions.  A lease is a good choice if you expect interest rates to rise.
 Amount Financed Banks generally will only lend a portion (75-90%) of the equipment cost — exclusive of soft costs — such as shipping, training, installation, etc.  Not a problem if you have cash, a problem if cash is tight.  Your complete purchase is financed, including soft costs and sales tax.  Out-of-pocket costs are usually limited to just your first month's investment and a small security deposit.  A good choice when cash is tight.
 Extra Costs Banks use fees to boost their rate of return on your loan.  You may encounter application fees, origination fees, commitment fees, schedule fees, funding fees, and be charged expenses associated with approving and executing your loan application.  In 99% of our small-ticket equipment leases (up to $75,000) there is no origination, commitment, or application fee.  Our documentation fees are minimal, in most cases ranging from $95 to $250 depending on the size of the transaction.  Larger commercial transactions may require certain fees depending on the details of the credit application.
 Available Terms Banks tend to be somewhat less flexible than leasing companies.  Good if you are looking for a standard item, not so good if you need flexibility.  In most cases, you choose the terms, the purchase option, and the down payment of your equipment lease.  We offer 60-month terms on most equipment and up to 84 months on "solid" assets.  Custom terms can easily be arranged.
 Equipment Types Banks won't finance equipment that they believe has limited collateral value.  Our national network of equipment lease funding sources ensures that we can fund most equipment types.
 Ease of Loan Application Regardless of the amount requested, banks won't even begin to extend credit until you supply a full financial package.  Our business is convenience. We offer lease programs up to $75,000 without financials.  Odds are that we can approve your equipment lease from the information provided on our simple application.
 Speed Banks are notorious for slow credit decisions.  It can take weeks to prepare your request and bring it to the credit committee for review.  More than half of our approvals are issued the same or next day.
 Collateral Banks usually secure their loans by requiring additional collateral such as real estate, equipment, inventory, receivables, or your house.  In fact, it is common practice for banks to file a blanket lien against all assets of your company.  In almost all instances, the only collateral required is the equipment being leased.
 Restrictive Covenants Bank loans require that the borrower maintain certain minimum financial ratios and report them to the bank on a quarterly or semi-annual basis.  If the borrower fails to maintain those ratios, the bank can call the loan.  They can also place restrictions on, or limit future borrowings from any institution.  There are generally no such restrictive covenants.
 Available Capital Banks tend to establish a maximum borrowing limit for their customers.  All loans and credit lines extended to the business and its owners (including personal loans, mortgages, etc.) will apply to this lending limit.  We represent dozens of funding sources eager for your business.  The options are virtually limitless.

Let us help you in every aspect of financing.

pinnacle-business-capital4Financing your business and equipment no longer has to be a daunting task. Pinnacle Business Capital makes the process easy by providing you "one stop" financing solutions. Whether you need equipment lease financing or working capital, look to Pinnacle Business Capital to make your dreams a reality.

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