Equipment Finance Options for Your Business: Which is Right for You?

Your business needs a new piece of equipment, technology, or office upgrade. And you decided that equipment financing is the best option. But with so many different leasing and equipment finance options, how do you know which is right for you? Here we will explain some of the different options available. But don’t worry- you’re not in this thing alone. At KLC, we don’t take a ‘one size fits all’ approach to leasing. We will help you find just the right option for your business.

Capital Lease/Finance Lease

These leases treat the equipment as an asset and a liability on the company’s balance sheet. The company can claim the tax benefit of depreciation associated with the purchase of capital equipment. At the end of the lease, the company has a purchase option of a set determined amount with no further obligation.

Operating/Tax Leases

In these leases, the total lease payments are considered an operating expenses on a company’s P&L thus lowering the company’s tax obligation and the equipment stays off the balance sheet as to not affect the company’s buying power. At the end of the lease, the company can return the equipment, enter into a new lease agreement, or purchase it at a fair market value price.

Sale/Leaseback

A sale/leaseback is an effective option if you need to generate working capital for your business. This is a useful method for companies who need working capital for operations, have equity in existing equipment, and that equipment is still useful to their business. A leaseback is neither debt nor equity. The company gains access to capital through the sale of assets and still maintains use of the asset. Simply put: Company A sells their equipment to KLC, and KLC leases it back to them over a specified period of time. Company A then uses this cash to further develop their business.

Equipment Finance Agreement

This contract gives a company the ability to own the equipment without using their own working capital to do so.  

In addition to these equipment finance options, there are other more specific lease options available as well. Get in touch with us today to schedule an appointment with one of our skilled team members. They will educate you on all of your options and help you make the most of your business.

*Disclaimer: KLC Financial, Inc. and its owners are not tax advisors, and this page is not intended to offer tax advice. Please consult with a qualified professional concerning your specific situation.