|Fixed rates / fixed payments
|Usually an adjustable rate
|Up to 5 years
|Usually 2 – 3 years.
|0 – 5% (1st and last payment)
|Typically 10 – 30%
|Not mandatory for most transactions up to $50,000 and financials are not required annually after that.
|Required on almost all transactions over $10,000 and banks usually require annual updates to maintain loan.
|Part of monthly payment
|Must be paid in advance
|None. Application fee only on completed transactions.
|Compensating balances, other bank charges, loan covenants.
|Usually 100% deductible over the term of the lease (makes effective rate lower)
|Depreciated over the IRS’s useful life of the equipment. Principal is not deductible.
|Possibly lower than bank financing due to tax benefits, lower down payment, longer lease term, and no requirements for compensating balances.
|Higher cost due to longer depreciation schedule, larger down payment, adjustable interest rate, and other hidden costs.
|Preserves bank lines and cash, for operating expenses such as salaries, advertising, etc.
|Depletes bank lines, possibly preventing opportunities to expand your business.
|Pledges only leased equipment.
|May require assets, home or other assets as collateral.
* Please consult your accountant or professional tax advisor for the best solution for your business.