Lease vs. Loan: Can you obtain financing for office equipment leases?

Your business equipment can include essential tools that drive revenue and contribute to the success of your enterprise. But buying new equipment or upgrading the technology that helps your business run smoothly can be expensive! You may be considering adding machines to your office or upgrading the ones you have – and that leads to an essential question: Do I have to pay for this all at once or can I make payments over time and keep my business capital free for other investments? If you decide to spread the expense out, your business can choose to lease the equipment you need or finance the purchase.

Financing for Leased Equipment

Can you blend these strategies by obtaining financing for your business equipment leases? That depends on the loan you’re considering. Generally speaking, there aren’t a lot of financing options for an equipment lease – because many loans will only be available for equipment you are purchasing and will usually require a lien on the equipment to secure the loan. Working capital or business operating loans, however, can provide funding for regular and necessary expenses like business equipment leases. Available through the Small Business Administration and private lenders, these loans can fund your lease or purchase of new or upgraded business equipment. If you’re considering these financing options, consult your accountant or tax attorney about the benefits of the arrangement and to make sure it’s the best decision for your business.

Lease vs. Loan

Newer tax regulations, like those in the Tax Cuts and Jobs Act of 2017, allow you to write off the purchase of business equipment under section 179 in the year it enters service. These regulations represent a change in the tax law as they allow businesses to classify the purchase as a business expense as opposed to a depreciable asset. This change can be a big benefit to your business – but, of course, it is subject to change or restriction from year to year. In order to take full advantage of this deduction, your business also has to show a profit in the year you take the deduction. These considerations can complicate your calculations as to whether or not buying new equipment outright or obtaining a loan for its purchase will be advantageous for your business. 

On the other hand, leasing equipment qualifies as a regular business expense whether or not your business shows a profit for the year – and the regulation has been on the books for years, insulating it against political outcomes and tax regulation changes. Leasing equipment also gives you the benefit of maintenance and upkeep throughout the year to keep your machines – and your business – running smoothly. And, at the end of the lease, you can upgrade your equipment without the big price tag of an outright purchase and without having to worry about how long a purchased machine is going to last. 

Sometimes, the right decision for your business is to purchase office equipment, either outright or with the help of an equipment or working capital loan. Usually, though, the tax benefits of leasing equipment – coupled with the world-class support and option to upgrade or continue the use of the equipment at the end of a lease – outpace those of purchasing the equipment to own. 

Equipment Advice from the Pros

When you’re considering a business equipment addition or upgrade, we’re here to help! The professional business equipment technicians and associates at Central Business Equipment can help you choose the right business equipment to meet your needs. When you need to dive deep into the tax implications of leasing versus buying versus obtaining a loan to lease or buy equipment, consult your accountant or tax attorney. When you need the best advice on which equipment is right for you, a short- or long-term lease arrangement, or new and refurbished business equipment for purchase, contact the experts at Central Business Equipment.