What’s the Difference Between Business Equipment Loans and Equipment Leases?

Business equipment loans and equipment leases are two different types of financing options available to businesses that need to acquire equipment for their operations.

A business equipment loan is a type of loan that allows a business to borrow money to purchase equipment. The equipment serves as collateral for the loan, and the borrower makes regular payments (including interest) until the loan is repaid. Once the loan is repaid, the borrower owns the equipment outright. Business equipment loans are usually offered by banks, credit unions, and other financial institutions.

On the other hand, an equipment lease is a type of agreement where a business leases equipment from a lessor for a set period of time in exchange for regular payments. The lessor retains ownership of the equipment, and the lessee has the right to use it for the duration of the lease. At the end of the lease term, the lessee may have the option to purchase the equipment for a predetermined price or return it to the lessor. Equipment leases are usually offered by equipment vendors, leasing companies, and some banks.

In summary, the main difference between business equipment loans and equipment leases is that with a loan, the business owns the equipment outright after repayment, while with a lease, the business is essentially renting the equipment for a set period of time.