WHY LEASE
The benefits of leasing equipment
Equipment leasing lets a business use equipment for a fixed monthly payment over a set term instead of paying for it up front. The main benefits: cash stays in the business, soft costs are included, payments are predictable and approval is faster than a bank’s.
12 advantages of leasing equipment for your business
In the order most owners weigh them: can I get the equipment, what does it cost me now, and what does it cost me later. Leasing has real drawbacks too, and they are set out below.
01
Faster approval
Minimal documentation and few restrictions, so you can move on an opportunity while it is still in front of you. Applications are approved in hours rather than days.
02
Easier to qualify for than a bank loan
No compensating balances and no cash-flow projections. Up to $150,000 is usually decided on a one-page application without financial statements, where a bank attaches escalator clauses, restrictive covenants and call-anytime provisions to equipment credit.
03
Cash stays in the business
There is no large down payment. A lease finances the cost of the equipment, so the capital you would have handed over at signing stays in the business and goes to work somewhere it earns.
04
Delivery, installation and training included
The soft costs of an equipment purchase are the ones that get overlooked: freight, rigging, installation, training your staff, ongoing support. We write them into the same agreement instead of leaving them as invoices you did not budget for.
05
Cash flow you can forecast
A fixed payment for a fixed term, with no floating fees. You know what the equipment costs every month for the life of the lease, which makes the rest of the year easier to plan.
06
Payments built around your year
Seasonal payment schedules for businesses that do not earn evenly, step-up structures for equipment that takes time to ramp, and a 90-day deferred program that lets the equipment run for three months before the first payment is due.
07
Room to upgrade
Technology moves and the competitive edge moves with it. Terms can be structured to allow upgrades and trade-ups partway through, so a five-year lease does not lock you to five-year-old equipment.
08
Options at the end of the term
Three of them, and they are yours to pick: return the equipment, buy it, or extend the lease. Nothing is decided for you at signing.
09
Someone else carries the ownership risk
You use the equipment for a set term at a set payment. If you hand it back at the end, what happens to it next is the leasing company’s problem — not a disposal job that lands on you.
10
An expense, not a depreciation schedule
On many leases the payments appear as an operating expense on the income statement rather than as an asset written down over years. Whether yours does depends on the structure, so your accountant should confirm.
11
Tax benefits passed through
Where the lessor holds the tax benefits of ownership, those benefits can be passed back to you in the form of a lower monthly payment.
12
Your bank credit stays free
A lease is secured by the equipment it pays for, not by a blanket lien on the business, and it does not draw on your bank line. That borrowing room stays open for working capital and the unexpected.
THE PROCESS
How does equipment leasing work?
A lease has three parties: you, the vendor selling the equipment, and the leasing company that pays for it. The leasing company owns the equipment, or holds a security interest in it, while you use it and pay for it over the term.
01
You choose the equipment
New or used, from any dealer, auction or private seller. You negotiate the price with the vendor, and the vendor’s quote, including any installation and soft costs, becomes the amount financed.
02
You apply and agree a structure
Up to $150,000 is usually decided on a one-page application without financial statements. The approval sets the term, the payment schedule and what happens at the end of the term.
03
The vendor is paid
Once the documents are signed, the leasing company pays the vendor directly and the equipment is delivered to you. You make fixed payments for the term while it works.
04
The term ends
With a fair market value lease you return, buy or extend. With a $1 buyout lease or an equipment finance agreement, the equipment is yours. Types of equipment leases compares them.
Newer business, or no financials to hand? We have programs for both: startup financing and no financials required.
THE OTHER SIDE
Disadvantages, and when buying is better
Leasing is not the right answer for every purchase. These are the trade-offs to weigh before you sign.
It costs more in total than paying cash
Over the full term, the payments add up to more than the purchase price, because the leasing company’s cost of money is built in. What you get for that is cash kept free today. Our guide to what sets the payment explains the parts.
You are committed for the whole term
A lease is a commitment to every payment in the term. If business slows or the equipment stops being useful, the payments still run to the end, and ending early generally means paying off the balance.
A fair market value lease builds no equity
With a fair market value lease you are paying for use. If you decide at the end that you want to keep the equipment, buying it costs extra. If you already know you will keep it, a $1 buyout lease or an equipment finance agreement fits better.
Equipment you will keep for decades
Some machines run for twenty or thirty years and never go out of date. When you will keep the equipment long after any term ends, owning it is usually the cheaper path, whether you pay cash or finance it to own.
Spare cash with no better use
The main benefit of leasing is keeping cash in the business. If the business has cash it does not need for payroll, stock, growth or a reserve, and nothing better to do with it, paying cash avoids the cost of financing.
The tax treatment depends on the structure
Not every lease is treated as an operating expense. A $1 buyout lease is generally treated as a purchase, which changes the deduction. Your accountant should confirm how a given structure would be treated before you choose it.
Leasing vs. a loan
If you have decided to own the equipment but would rather not pay cash, the real comparison is a lease against a loan. An equipment finance agreement works like a loan: you own the equipment from the first day and we hold a security interest until the last payment. A lease keeps the end-of-term choice open. Equipment lease vs. loan sets the two side by side.
LEASING VS. THE BANK
We’re not a bank. We’re ACG.
American Capital Group has done one thing since 1995: equipment leasing for small businesses. Banks lend on equipment too, and sometimes a bank is the right answer. But when the asset is a machine rather than a building, the two take very different paths to the same equipment.
With ACG
At a typical bank
One short application
WITH ACG
One page to apply, with no financial statements up to $150,000.
AT A TYPICAL BANK
Cash-flow projections and a full financial package before anyone looks at the deal.
No hit to your credit
WITH ACG
We use a soft credit pull, which won’t affect your credit score.
AT A TYPICAL BANK
A hard inquiry on your credit report, plus years of tax returns.
Answers in hours
WITH ACG
A credit decision usually the same day.
AT A TYPICAL BANK
Weeks of review before you hear back.
Keep your cash
WITH ACG
No large down payment, and soft costs like freight, installation and training go in the same agreement.
AT A TYPICAL BANK
A substantial down payment, plus compensating balances left on deposit.
Your assets stay yours
WITH ACG
The equipment is the collateral. Nothing else is tied up.
AT A TYPICAL BANK
A blanket lien across your business assets, not just the equipment.
Keep your bank lines free
WITH ACG
Lease the equipment and your bank credit stays open for working capital and the unexpected.
AT A TYPICAL BANK
Bank equipment financing uses up borrowing room you may need later.
No surprises later
WITH ACG
A fixed payment for a fixed term, with no floating fees.
AT A TYPICAL BANK
Escalator clauses that can raise what you pay partway through.
Can’t be called mid-term
WITH ACG
Your lease runs its full term. Make your payments and it can’t be called early.
AT A TYPICAL BANK
Call-anytime provisions that can shorten the term on you.
No financial covenants
WITH ACG
No minimum balances or ratio tests. Nothing to trip over while you pay on time.
AT A TYPICAL BANK
Restrictive covenants, such as minimum balances and debt-to-equity tests, that can put you in default even when every payment is on time.
Built around you
WITH ACG
Seasonal, step-up and 90-day deferred structures, any vendor, new or used, and return, buy or extend at the end.
AT A TYPICAL BANK
Fewer structures on offer, and less room to change them.
The bank column reflects typical bank equipment-financing terms. Individual offers vary, and every application is subject to credit approval.
TAXES
Where the tax advantage comes from
Two things are usually at work. A lease payment is generally an operating expense rather than a capital purchase, so it comes off the income statement in the year you make it instead of being depreciated across the life of the asset. And where the lessor holds the tax benefits of ownership, those can come back to you as a lower monthly payment.
Section 179 is the other half of the picture, and it applies to financed equipment as well as equipment bought outright.
Confirm it with your own accountant
How a particular lease is treated depends on how it is structured and on your own tax position. American Capital Group is an equipment finance company, not a tax advisor, and nothing on this page is tax advice.
Tell your CPA which structure you are considering before you sign. If it would help, we will put the proposed structure in writing so they have something concrete to look at.
Equipment leasing questions
What are the benefits of leasing equipment?
The main benefits are that cash stays in the business, soft costs such as freight, installation and training can be included, payments are fixed for the term, and approval is usually faster and simpler than a bank loan. You also choose what happens at the end, from a $1 buyout to handing the equipment back, and lease payments may be treated as a business expense, which your accountant should confirm.
Is equipment leasing tax deductible?
In many cases, yes. Payments on many leases are treated as an operating expense and deducted in the year they are paid. A $1 buyout lease or an equipment finance agreement is generally treated as a purchase instead, which can qualify for Section 179 expensing. How your agreement is treated depends on its structure and your own tax position, so your accountant should confirm before you sign.
How does equipment leasing work?
You choose the equipment and the vendor, then apply. Once approved, the leasing company buys the equipment and pays the vendor directly, and you make fixed payments for a set term while you use it. At the end of the term you return it, buy it or extend, depending on the lease type you chose. With a $1 buyout lease or an equipment finance agreement, the equipment is yours once the payments are done.
Should I lease or buy equipment?
Lease when you want to keep cash in the business, when the equipment will need replacing or upgrading in a few years, or when the soft costs are a large part of the bill. Buy when the business has spare cash with no better use for it, or when the equipment will run for decades and you plan to keep it. If you want to own it without paying cash, a $1 buyout lease or an equipment finance agreement gets you there.
What equipment can be leased?
Almost any equipment a business uses for commercial purposes, new or used, from any dealer, auction or private seller. That includes medical, construction, restaurant, machine shop and IT equipment, among much else. Transactions start at $10,000, and we do not finance personal or household purchases.
FREE QUOTE
Get a custom quote in minutes
Tell us what equipment you need and roughly what it costs. An ACG specialist follows up, typically within 24 hours, with options built around your business.
Business equipment financing. $10,000 minimum. We do not finance personal or household purchases.
- — NO OBLIGATION, NO HARD CREDIT PULL
- — NEW OR USED, ANY VENDOR
- — OR CALL (949) 822-3017
Keep reading
What we finance
Medical, construction, kitchens, machine shops, IT — and the rest.
Common questions
Terms, end-of-lease options, credit, and what we need from you.
Estimate a payment
Enter an equipment cost and see roughly where the monthly payment lands.
Our customers
Businesses we have funded, in their own words.
Want the equipment running before the first payment? Ask about 90 days deferred. Weighing it against a bank? Lease it, or borrow to buy it? sets the two side by side, and what moves your payment covers the number itself.
Decided? It is one page.
31 years financing equipment for small business. Apply, or call and talk it through first.