By 
Leasing and Financing companies are the number one topic that pops into mind when thinking of starting a business, building a company, or even buying a car and other things acquirable. Given that those things require quite a hefty sum of money, people often seek assistance from both Leasing and Financing companies to fund whatever they aim to create or acquire. Since people rely on both Lease or Finance depending on their needs and capability, it’s easy to confuse which one is. And if it is your first time deciding which of them is the best choice for your, to know their difference, here’s a breakdown of Lease and Finance.
Lease/Leasing
Let us break things down into precise and clear portions to make things simple. The term Lease is a contractual and/or a financial agreement between the Lessor/Leasing company that owns the asset, and the Lessee, the party that pays for the rights to use the asset. An example is leasing office needs in an office equipment leasing company. The leasing company owns the office equipment that the lessee needs. The leasing company can grant the lessee the right to use the office equipment through rental payment through the contract. The amount of payment will depend on the lessor’s income. Compared to Financing, rental payment for leasing is usually smaller and cheaper by 30 to 60%. And unlike Financing, most leasing companies (depending on the agreement) do not require down payments.
This is perfect for businesses and companies with no budget for down payments to acquire equipment. The only downside is that after the contract, the lessor will take their assets back depending on the duration of the agreement. Meaning the lessee will not own the assets. Most of the time, the lessor will offer another contract agreement, or if you are lucky, they might offer you to buy the assets.
Finance/Financing
The term financing refers to an actual financial agreement where a financing company/Institution finances money to acquire an asset. It’s a loaning agreement where a financing company will lend you money to buy an asset. An example is when opening a restaurant, most restaurant owners acquire restaurant equipment financing to have their restaurant equipment needs and then pay the loan from financing companies in monthly installments. A financed asset’s value is expected to be higher than the cash value because of the interest and principal. A financed asset requires a down payment amounting to a certain percentage of its value, usually a 20%-30% down payment. If you financed a million-dollar asset, the down payment could be $200-300,000. The remaining amount will be spread equally over a specific period (Usually 3-6 years to pay) in Equated Monthly Installment. The good thing about this is that after paying the loan amount, you will have the ownership of the asset.
Conclusion
Lease and Finance can easily be interchangeable if you don’t understand their difference since they both provide an opportunity for everyone to acquire needed assets for their ventures. Since their differences are now apparent, the final factor for decision-making will be owned. It now depends on your choice about which is better for your needs.
If you are looking for a business equipment provider that can deliver your needs, visit Noreast Capital website today
Comments