What’s the difference between a lease and a loan?
An equipment lease is an agreement allowing a business to acquire and use equipment, while conserving cash and existing lines of credit. The customer (lessee) makes periodic payments to the equipment finance company (lessor) over the lease term, and the lessor holds legal title to the equipment. Leases are generally written to allow the customer to purchase or return the equipment at the end of the lease term. On the other hand, an equipment loan is an agreement advancing funds for the customer to use to purchase equipment. The customer (borrower) makes periodic payments of principal and interest to the lender over the loan term. The customer owns the equipment and holds legal title; the lender takes a security interest in the equipment until the loan is repaid. What are the advantages of leasing? Although there are many individual advantages to leasing equipment versus purchasing with cash or financing with debt, these advantages can be placed into four categories: • Leasing improves
