Loan vs. Lease
Down payment. A lease requires no down payment and finances only the value of the equipment expected to be depleted during the term. The lessee usually has an option to buy the equipment for its remaining value at lease end. Often the buyout is structured as a $1 payment. A loan requires the end user to invest a down payment of 20-25% of the purchase price. The loan finances the remaining amount. Leasing allows companies to otherwise use cash for R&D, expansion, etc.
Collateral. Typically the equipment itself is sufficient under a lease. With bank loans, borrowers are often required to pledge other specific assets.
Borrowing Restrictions. Usually, A lease does not contain restrictive covenants that limit the lessee's ability to borrow other funds. As long as the lessee is current with the terms and conditions of their lease, the lessor cannot disrupt the lessee's use of the equipment or demand payment in full of the outstanding lease payments. Under a loan agreement, lenders usually include restrictive covenants that require the customer to maintain certain financial ratios that may restrict the customer's ability to borrow money going forward. In the event the customer violates one or more of the covenants, the lender has the right to demand payment in full of the outstanding loan amount even though the loan payments have been made on time.
Obsolescence. With a lease, the end user transfers all risk of obsolescence to the lessors as there is no obligations to own equipment at the end of the lease. Under a loan, the end user bears all the risk of equipment devaluation because of new technology.
Tax Considerations. When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. The equipment write-off is tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year. The deduction is also the same every year, which simplifies budgeting. With a loan, end users may claim a tax deduction for a portion of the loan payment as interest and for depreciation which is tied to IRS depreciation schedules.
Inflation’s Impact. With a lease, more of the cash flow, especially with a residual portion to be paid at a lease’s termination, occurs later in the lease term when inflation makes dollars cheaper. You can also structure shorter leases and trade out for the latest technology as it changes!
Compare. We all know buying expensive medical equipment is stressful and time consuming. So much is at stake: Get the wrong equipment and you can’t properly treat your patients. Buy a damaged unit and suffer the downtime and costs of repairs. Pay too much and feel cheated and maybe even, embarrassed. And the buying process feels like such a huge waste of time!
If you hate the idea of searching for the equipment you need, you’ll find Technology Capital Partners’ (TCP) services a savvy alternative designed to save you time and money in obtaining the exact medical equipment you seek. If you hate the idea of searching for the equipment you need, you’ll find Technology Capital Partners’ (TCP) services a savvy alternative designed to save you time and money in obtaining the exact medical equipment you seek.
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Need to sell older equipment first? We’ll “shop” it to dealers and wholesalers to help you get the most money for your trade. We’ll work to get you the best deal, the best incentives, the best rebates – even freebies (like setup, in some cases). Finally, we’ll offer you financing options to get you the best deal. We make equipment buying is as easy as ordering takeout!
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