What's the difference between equipment leasing and equipment financing?

Equipment leasing allows you to use an asset without the burden of ownership. At the end of the lease term, you decide if you want to pay to own the equipment, return it, or continue to lease. Equipment financing allows you to own the equipment after a fixed term. When it comes to structuring your financing, Cardiff is flexible. Choose the program and terms that fit your budget and your cash flow.

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Operating Lease

You're probably familiar with how an automobile lease works. It can save you money, but you won't own the asset at the end of the term. Some business owners like this structure, because they have the option to buy or return the equipment at the end of the lease, while enjoying a lower payment in relation to financing. Your CPA may not need to list an operating lease on your balance sheet, which may offer a number of advantages.

Equipment Finance Agreement or Capital Lease

An Equipment Finance Agreement (EFA) shares many of the characteristics of a loan. It comes with higher payments than an operating lease, but you are the legal owner of the asset. If you're certain you want to own the equipment once the term is complete, this is the right structure for your business. The EFA has a cousin called a capital lease. If your lease has a bargain purchase option at the end like $1 or $101, this is a capital lease structure. There may be some tax benefits in choosing a capital lease over an EFA, but that's between you and your CPA.