In any small to mid-sized business (SMB), there comes a time when your company hits a growth ceiling, decides to expand, or needs to make decisions on equipment or capital improvements. This can be an exciting time for a business, as well as confusing. Most small businesses concentrate on what they do well, and exploring financing options is not a critical priority. One of the first questions SMBs will be faced with when looking to finance equipment is whether to go to their bank or explore other options.

While they may appear on the surface as one in the same, there are actually many differences between lease financing versus bank financing. These differences could have major ramifications on your business, so it’s important to understand and weigh the comparisons. Although not an exhaustive list, we’ve outlined some of the comparative highlights.

1) The application process:
In a traditional banking situation, the SMB owner approaches the bank, starts an application and then the application moves into a credit review process which can take weeks. The bank will often request a full financial package to accompany the application. This can be a hardship for many, and bothersome for most. In a lease financing situation, however, a one-page application for situations up to a quarter million is often the only paperwork required and most credit decisions can be delivered in just a few hours. The speed and ease to start the process is incredibly helpful for companies.

2) Up-front costs:
If bank financing is selected by a company, they should expect a down payment requirement of approximately 25% of the total equipment loan. Banks want to minimize risk, and in doing so, they want to share in the financing with the borrower. If choosing a lease option, a company can often receive 100% financing, without the need to put money down.

3) Tax implications:

It’s important to understand how the choice between bank financing and leasing will affect your business taxes. Ownership of the equipment through bank purchase may only net you depreciation and interest, versus leasing equipment with 100% of the costs deductible. Leasing could be a very advantageous option for a SMB. You’ll want to be sure to speak with your accountant or tax advisor to understand the direct impact of either option on your business.

These are just a few of many key differences between bank financing and lease financing. 
At Axe Business Funding, we work with many businesses nationwide that have contemplated these issues and are finding that leasing makes better financial sense for their business. We partner with companies to help them grow and concentrate their efforts on their business, while we focus on what we do best – providing the best financing options to capitalize on business opportunities.

To learn more about the benefits of leasing equipment, contact Axe Business Funding today!

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