When you take on a loan, you borrow money to make a purchase; on the other hand Leasing is a term rental agreement for the use of specific property. As a means of financing, loans and leases have benefits and drawbacks.
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Lease |
Loan |
| Terms |
In most cases, you have the option of choosing the term, the purchase option and the down payment for your lease. |
Banks tend to be somewhat less flexible than leasing companies.
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| Time |
We know that time is of the essence. More than half of our approvals are issued in two or three business days.
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Banks are slow credit decision makers. It can take weeks to prepare your request and bring it to the credit committee for review
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| Collaterals |
In most instances, the only collateral needed to finalize your lease is the property being leased |
Banks usually secure their loans by requiring additional collaterals such as real estate, equipment, inventory, etc.. |
| Cash Payment |
Requires no down payment with 100% financing. No money is borrowed
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Off balance sheet financing
(Improve financial ratios)
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| Balance sheet |
Off balance sheet financing
(Improve financial ratios)
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Negative effect on balance sheet as the equipment appears as asset with a corresponding liability |
| Early Termination |
You are responsible for early termination charges, as stipulated in the lease contract |
You are responsible for paying off the loan.
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| Documentation |
Application and documents simplicity |
Complicated documents and applications required |
