| Loan | Lease |
| Typically requires other collateral to support exposure for the bank |
Only secured by the equipment under contract |
| A loan underwriter will require the borrower to put a large down payment on the equipment |
100% financing, including soft costs such as installation charges, shipping and tax |
| Between down payment and initial payments, borrower out of pocket more money |
Only two initial payments required, eases initial hit to cash flow |
| Balance sheet: shown as an asset with a corresponding balance sheet liability |
Balance sheet : are not shown, written off as short term expense |
| Ownership: Borrower owns equipment and assumes risk of obsolescence |
Lessee does not own equipment and transfer risk of obsolescence to the underwriter |
| Tax : entitled to deductions on interest only and depreciation over time |
Tax: Operating leases
- entire payment is deductible
- write off is tied to term, which if shorter than depreciation schedule means greater tax savings than standard depreciation
- fixed over the term, easing budgeting
|
| Credit approval: based on evaluation of financial package, requiring borrower to supply audited financials, tax returns and personal returns |
Credit approval : on small ticket transactions, one page application only |
