Equipment Lease vs. Loan Comparison Guide
Choosing between an equipment lease or loan depends on whether you value ownership or cash flow; a loan offers full ownership and Section 179 tax deductions immediately, while leasing provides lower monthly payments and easier upgrades. For most businesses, a $1 Buyout Lease functions like a loan with tax perks, whereas a Fair Market Value (FMV) lease is superior for technology that depreciates rapidly.
Key takeaways
- An equipment loan provides immediate ownership and is best for assets with a long lifespan like tractors or CNC machines.
- FMV leases facilitate easier technology cycles by allowing you to return or upgrade equipment every few years.
- Section 179 allows businesses to deduct the full price of equipment in the first year, potentially creating a massive tax shield.
- Equipment financing is 'self-collateralized,' meaning the lender uses the machine itself as security, often resulting in lower rates.
- Soft costs like installation and freight can usually be wrapped into the lease or loan to preserve your cash.
- A $1 Buyout Lease offers the tax benefits of a purchase with the simplified application process of a lease.
Who this is for
This guide is for business owners in industries like construction, manufacturing, medical, and transportation who are looking to acquire new or used hardware. Whether you are a trucking company expanding your fleet or a dentist's office upgrading imaging technology, understanding the difference between a capital lease and a loan is critical for your balance sheet.
Our advisors help those who want to compare the total cost of ownership against the flexibility of a lease. If you have at least $15k in monthly revenue and a 600+ FICO, we can help you find the 'sweet spot' where your new equipment generates more nectar than it costs in monthly payments.
What you need to qualify
We simplify the approval process by focusing on the value of the asset and your business's momentum.
| Requirement | Typical standard |
|---|---|
| Minimum FICO Score | 600 (Lower for high-value collateral) |
| Time in Business | 12+ Months (Startups with 700+ FICO considered) |
| Monthly Revenue | $15,000+ |
| Equipment Cost | $10,000 to $5,000,000+ |
| Documentation | Bank statements (3 months) & Equipment Invoice |
| Down Payment | 0% - 20% (Structure dependent) |
| Term Lengths | 24 to 72 Months |
| Funding Speed | 1 to 3 Business Days |
Best funding options
Depending on your cash flow and ownership goals, one of these structures will be the best fit for your next acquisition:
$1 Buyout Lease
Ideal for long-term assets you want to own for $1 at the end of the term.
FMV Lease
Lowest monthly payments with the option to return or upgrade equipment.
Equipment Term Loan
Large-scale funding for heavy machinery or fleet expansion projects.
SBA 7(a) Equipment Loan
Traditional financing for permanent ownership from day one.
When this makes sense
- When the equipment has a long useful life (10+ years) and you want to build equity.
- When you need to maximize your tax deductions this year via Section 179.
- When you have enough cash for a 10-20% down payment to lower the monthly cost.
- When the equipment is a 'core' asset that won't become obsolete quickly.
When to be careful
- When the technology changes rapidly (e.g., computers/software), as a loan locks you into old tech.
- When the interest rate (implicit in the lease) is significantly higher than a traditional bank loan.
- When the equipment is specialized or custom, as this may require a larger down payment.
- When your business has highly seasonal revenue and cannot commit to a fixed monthly payment.
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Whether you need a $1 buyout lease or a traditional equipment loan, our experts help you secure the lowest rates from 100+ vetted lenders. Get your no-obligation quote today.
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