Having access to the equipment and technology they need is vital for the success of businesses across all sectors. From IT equipment such as computers and servers to construction, medical, and manufacturing equipment, technology is constantly evolving and, to remain competitive, businesses must be able to keep up.
Buying the equipment that your business needs to operate can be costly – but there are options available.
Equipment leasing and financing are two common ways to acquire new equipment and technology without jeopardising cash flow.
If you’re considering taking out a lease or finance to access equipment for your business, you might be wondering which is the best option for your business. Read our guide to find out more about the difference between a lease and finance.
An equipment lease works in a similar way to a rental agreement.
When you lease equipment, you are essentially renting the equipment, paying monthly instalments over an agreed term. Although you will have full access to the equipment, you will never own it during the term of the lease.
A lender buys the equipment you need, and then leases it to you (or rents it out) for a fixed monthly payment, over the agreed term. Once the term is up, you can choose to buy the equipment and keep it, renew your lease and continue making monthly payments, or return the equipment to the provider.
Finance is like a loan – the lender will cover the capital you need to purchase the equipment, and you will pay off the value of the asset in monthly instalments, with interest. You own the equipment or technology and take on all the risk and responsibility for depreciation.
The finance company will loan you all or part of the total value of the equipment, depending on your needs. Once you’ve paid off the loan in full, you will own the equipment.
Leasing equipment offers a number of benefits, including:
If you’re considering leasing, there are also a number of potential downsides to think about, including:
The benefits of equipment finance include:
The potential downsides of equipment finance include:
Leasing and finance are similar in the sense that they will both allow you to access the equipment you need relatively quickly, without having to pay for it outright. However, there are differences between these two models.
The key difference between leasing and finance is ownership. With a lease, you use the equipment, but you don’t own it during the term of the lease. With finance, however, you will have full ownership of the equipment – once you have paid the agreed instalments.
To put it simply – finance means you’re buying the equipment (with help from a loan), and leasing means you’re renting the equipment.
The best option for your business will depend on your situation now, and how you see your business growing in the future.
When deciding which option is right for your business, you’ll need to take a number of factors into account, including:
If, for example, the equipment or technology you need is likely to be outdated within a couple of years, leasing could be the most effective option. However, if you’re investing in durable equipment with a long lifespan, that will retain its value, finance could be the best option.
If cash flow is a concern then leasing is typically the more affordable option, while finance could be the better choice if investment, resale and return on investment are more of a priority.
At CHG-MERIDIAN, we provide business equipment financing and leasing solutions for businesses across a range of sectors. As experts in the leasing of the latest equipment and technology, we can offer bespoke financial models designed around your specific volumes, helping to simplify cost control while reducing investment risk.
To find out more about our equipment financing solutions, please get in touch.