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The Benefits of Equipment Leasing vs. Bank Loans (and Other Financial Products)

Most business owners have multiple choices on how they want to acquire equipment. These choices include paying cash, using a credit card line, requesting a loan from their bank, or understanding how lease financing best fits their business.

With over 35 years in equipment financing, Americorp Financial believes a lease, rental or financing solution becomes the choice of today’s progressive businesses. The Equipment Leasing and Financing Association also verifies that statement as almost 80% of today’s businesses finance equipment and 2018 has started strong with businesses investing in equipment using financing during second quarter.

So why do Fortune 500 companies to small businesses decide to lease equipment instead of using a bank loan, cash or credit card line? Let’s talk about the latter two first.

Cash: Can your customers afford to spend $50,000+ out of their budget right now on equipment? If so, how long do they expect to use your equipment? With today’s technology becoming extinct tomorrow, businesses do not want to invest a high amount in equipment that will not last more than 3 to 5 years (or less). The time value of money also factors into their decision based on the value of the dollar today vs. 3 to 5 years from now.

Credit Card: Everyone wants to take advantage of reward points using a credit card for large transactions. However, a credit card line also could involve a high interest rate (20%+) and a negative effect on the company’s credit rating if payments are missed. Should most companies use a credit card to acquire your equipment? We would think the answer is “no.”

As an independent equipment financing company, Americorp will promote our leasing, rental and financing programs against a bank loan because manufacturers need financing alternatives to cash for their customers. 

How does an equipment lease/rental/financing agreement help close a sale?
  • Eliminates technology obsolescence risk due to leasing vs. owning the equipment (can purchase or upgrade at lease end).
  • No down payment required – Banks can require up to 25% of equipment cost.
  • No effect on your current bank lines – doesn’t tie these credit lines up for future needs.
  • Fixed payments (monthly, quarterly, etc.) – loan payments can increase or decrease.
  • Equipment serves as collateral for transaction, and additional collateral is not required.
  • Credit approval typically within hours (one-page application) – banks can take days/weeks to approve loans.
  • Ability to add qualified services into the financing payment (installation, training, maintenance, software, etc.).
  • Potential tax benefits through Section 179 of the IRS Tax Code.