Every week, we seek to arm small businesses owners with the right tools to make informative financing decisions. In previous posts, we’ve covered merchant cash advances, business lines of credit and SBA loans.

Today, we are going to explore business equipment leases – a form of financing 80% of businesses use to lease equipment, according to the Equipment Leasing and Financing Association1.

What are business equipment leases?
A business equipment lease is a secured form of financing where a piece of equipment is collateralized over time. At the end of the series of payments, you can purchase the piece of equipment at either an agreed upon amount or the fair market value.

What is the difference between a true small business loan and a business equipment lease?
There are several differences between true business loans – such as those offered by OnDeck – and business equipment leases.

  • Business equipment leases are specific to equipment needs, and don’t cover other expenses such as inventory or marketing. True business loans – such as those offered by OnDeck – can be used to finance all types of business needs.
  • Business equipment leases are often credit score sensitive. At OnDeck, our personal credit score minimum is 500.
  • Typical business lease amounts are between $25,000 and $2 million. OnDeck offers loans between $5,000 – $250,000

How long does it take to apply and how much does it cost?
Often, equipment providers offer some form of equipment lease financing, so it’s best to ask your vendor directly about the application process and fees. However, the lease commits you to keeping the equipment for a long period of time, so the lifetime cost may be higher than if you purchased it outright.

What does repayment look like?
Payments are typically monthly or quarterly and are often tax deductible.

What are common uses?
Business equipment leases are specific to equipment needs – such as financing the purchase of medical equipment like dental chairs, restaurant-grade ovens, refrigerators, or computers. It’s available to businesses at any stage of development – from startup to more established businesses.

Will it build my business credit?
Yes – most providers report repayment back to the credit agencies.

OnDeck is a Google Ventures-backed company with an A+ Rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.

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