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Leasing VS Bank Financing |
Considering the small size of an under $100,000 transaction, we recommend using equipment financing
for its intended purpose…financing equipment. We advise conserving working capital and preserving
bank lines for future growth of your core business.
An additional consideration is the impact of borrowing such a small
amount from a bank. As a business owner, you’re probably aware that
once you’ve borrowed a small amount from a bank, your company is
labeled a “small” borrower. Banks will tend to only lend small amounts
to you in the future to match your comparable borrowing experience.
Don’t cripple your borrowing power for the future…
| LEASING |
BANK LOAN |
CASH PURCHASE |
| A non-cancelable contract over a fixed term |
Repaid in regular installments |
Use of working capital |
| Advantages |
Advantages |
Advantages |
*100% Financing
*Conserve capital
*May lessen tax liability
*Preserves bank lines
*Flexible terms
*Hedges against inflation
*Obsolescence protection
*Fixed terms and payments
*Full use without ownership
*Creates new credit source
*Easy add-on/trade up
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*Direct ownership
*Depreciation
*Appropriate when bank lines remain untapped or there is a loan covenant required
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*No finance charges
*Direct ownership
*Depreciation
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| Disadvantage |
Disadvantages |
Disadvantages |
*Non-cancelable
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*Capitalizes equipment
*Relatively short term
*Interest rate subject to adjustment during term
*Extensive documentation
*Exhaust credit lines
*Non-financial charges
*No obsolescence protection
*May require down payment and/or origination fees
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*Attacks cash reserves
*Negates time value of money
*Reduces time value of money
*Reduces investment leverage
*No hedge against inflation |
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