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Equipment Financing vs. Leasing: What’s the Best Choice for Your Business?

  • Financing|
Published: 06/07/2017

Ambition, business acumen, and market timing are often cited ingredients needed to grow a small business venture. However, while those are all necessary components, no small business could possibly run without equipment. In fact, the right equipment can be the difference between a successful business and a failed attempt. But in order to acquire cutting-edge machinery and the technology to run operations smoothly every day, organizations first need to find the funds for equipment.

However, as most business owners can attest, rarely does your cash flow cover the entirety of necessary equipment investments. Even if an entrepreneur had enough funds to cover machinery and technology needs, it would be ill-advised to spend it all on equipment. Luckily, businesses have two more realistic options when it comes to taking on new business equipment:  financing and leasing.

Equipment financing:

Is the process of acquiring a loan to purchase equipment. These loans can be obtained through a variety of lenders that require scheduled repayments plus interests and fees. The length of time business owners are allotted to pay off a loan depends on the lender and the borrowed amount. Over the course of the term, small businesses are required to pay back the base price of the equipment plus the fees that have accrued over the course of the term. Typical interest rates can range between 6%-16% of the total cost, and terms generally span between 2 and 5 years.

Typically, debt finance loans are offered when businesses can collateralize the equipment with other assets, or meet stringent lending requirements, and traditionally the process is a lengthy one.  However, with the proliferation of new online lenders, it has become far easier for the businesses that truly need equipment financing to obtain it.  The increased competition online is also resulting in a lessoning of requirements.  Businesses of various credit scores and shorter business tenure are finding funding.

Equipment leasing:

is the process of creating what is essentially a rental agreement with an equipment company. Under the terms of a lease, small businesses make monthly payments that enable them to use equipment for the duration of the lease terms. Some lease agreements allow the lessee to purchase the equipment at the end of the term. However, if the machinery becomes obsolete or outdated over the course of the term, it is wiser to end the lease, begin a new agreement with update equipment or purchase outright.

Few financial institutions are offering a streamlined leasing experience online but a few like Currency Capital and express are attempting to offer the same advantages currently available to online finance and applying them to the equipment leasing process.

Which option is best for your business?

Both options serve the same goal:  enable businesses to leverage the appropriate equipment in order to operate day in and day out. However, depending on the type of equipment your business requires, choosing between leasing and financing can make a significant difference on your business’ overall financial status. Here are the pros and cons associated with both:


Financing equipment offers your business more freedom to do with the equipment as you please. For one, financing equipment allows you to decide how and when to update equipment. It may not make sense for your business to pour a ton of money into fixing up an old machine, especially if that machine will become unnecessary to your day to day operations. Additionally, financing equipment is tax-deductible; within your first year of ownership, you can receive a deduction of up to $500,000 on new and used equipment. The downside of financing is, of course, the down payments and additional fees associated with servicing the debt.


Leasing enables companies that know they’ll need updated machinery on a regular basis to swap in and out equipment more often without much of a hassle. It is also less expensive up front; companies that choose leasing know exactly how much they’ll have to repay month to month for a set amount of time without any surprises. While leasing might sound like the better option, especially if overall budgets are tight, business owners should be aware that they may end up paying more in the long run. Even if you no longer have use for a piece of equipment, you still have to fulfill your leasing agreement.  Additionally, leasing tends to be more expensive in general; it is usually more cost-effective in the long run to purchase rather than lease.

Other than real estate, equipment is often the largest up-front expense any new business faces. While other expenses including inventory and adding new employees can be acquired gradually and at scale as the business takes in more revenue, a full suite of equipment is needed at the same time. Imagine trying to open a restaurant without an oven – it just wouldn’t work. Understanding the typical lifespan and associated costs with machinery needed to run your business is the best way to decide between financing and leasing.

If you have any questions regarding typical equipment financing costs, don’t hesitate to reach out to our Funding Specialists at Currency Capital. We’re always available for a call at 877-358-4595, and would love to answer your questions and guide you toward the best option for your business.

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