When you want to finance or lease equipment as a small business there are a couple of different ways to do so. The most important thing to understand is that just about any asset used to conduct a business could be considered “equipment.” You have the choice to either lease or finance an equipment acquisition.
For many years the two methods were very different from an accounting standpoint, but after recent changes to the Generally Accepted Accounting Standards, they are now pretty close to the same thing. Although the differences are subtle this blog post discusses what they mean and how they can help you make the best decision when your business needs equipment.
What do you consider equipment? By definition, any tangible assets, other than real property or the building in which you work could be considered business equipment. This includes just about everything from heavy equipment to custom or prepackaged software could be financed or leased.
What is equipment financing and leasing?
When you finance you own the asset and provide it as collateral for a loan.
When you lease, the leasing company owns the asset and allows you to use it for a monthly fee. Generally, at the end of the initial term of the lease, the asset ownership converts to you for a nominal fee, usually $1.00. If you choose to lease be sure that you carefully read the document that pertains to ‘equipment ownership’ and what you must do to advise your leasing company of your intent to buy the equipment at the end of the lease term.
Both Equipment Financing and Equipment Leasing accomplish the same thing, they allow you to add the equipment you need to grow your business or simply replace an asset for a fixed monthly expense. In our opinion, financing is much cleaner and safer than leasing. If you want more detail on this just call and we’ll gladly answer your questions.
Let Charter Capital help you connect with the best source of funding for your business. Call or email us today!