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What is the difference between a lease and a loan?

Choosing the right financial product for your business needs is crucial in order to stay on budget. In this article, you will find the most important differences between a bank loan and a lease.

What is the difference between a loan and a lease?

A loan is borrowing money to purchase a piece of equipment and pay it back over time.

A lease is an agreement that allows you to use specific equipment for a period of time.

 

  Loan Lease
Amount 60-80% of the purchase price. Banks typically do not include additional costs, such as delivery, installation, software licenses, or sales tax. Up to 100% of the equipment price. Some leasing companies can also incorporate additional costs into your agreements.
Rates Banks rely on Prime Rate or other indexes when determining an individual rate for your business. Therefore, rates and payments can fluctuate during the term. Lessors determine a fixed rate upfront and offer equal payments month-to-month unless special provisions are included in the contract. That makes budgeting and cash flow management easier.
Terms Banks offer a selection of standard terms and tend to be less flexible when it comes to special requests. Equipment leasing agreements can be as short as 12 months and as long as 84 months. Sometimes, it is possible to request a balloon payment at the end to get lower monthly payments.
Equipment It is easy for banks to lend money for popular products such as cars, but much harder for the types of professional equipment they do not understand. Leasing companies specialize in working with industrial equipment. They understand your business and the equipment in use.
Collateral Most banks require additional collateral such as other owned vehicles, real estate, or accounts receivable. Only the piece of equipment being leased is required as collateral. Your other business assets are not involved.
Application Banks take 2 to 3 weeks to review your file and make a decision. Typically, a decision can be made in just 1 business day.

Considering an equipment purchase?

Connect with our Account Executive to find a solution that suits your business needs.

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Why is Medical Equipment Leasing Worth $130 Billion?

The American healthcare industry is a large part of our economy, yet it also faces financial challenges. With the evergrowing competition in the space, hospitals and local clinics need to keep their costly equipment up-to-date. That is why over $130 billion worth of medical equipment is being leased each year.

Why lease medical equipment?

Transportation equipment, imaging, and diagnostics machines are costly and have limited lifespan. Leasing can help in managing cash flow and maintaining operational flexibility.

Leasing provides the right to use medical devices over a period of time, typically three to five years, without the burden of ownership. It offers lower monthly payments, low to zero upfront costs, and flexible options at the end of the term.

What are the benefits of leasing medical equipment?

Efficient capital management

Lower operational costs and less money tied up in upfront equipment purchases enable hospitals and clinics to invest their capital elsewhere and retain positive cash flow.

Operational flexibility

At the end of your term, you can return or upgrade the equipment, keep leasing, or purchase it at face value. You can choose the most suitable option.

Procurement relief

Leasing companies typically fund deals in 2 to 5 days and require no down payment. Banks tend to take a more conservative approach, requiring 2-3 weeks for credit review and a 20% down payment.

Getting new (or used) equipment

In light of the recent pandemic, healthcare organizations have been relying on fast and easy medical equipment leasing to support the increasing demand for their services.

At Alliance Funding Group, we feel the responsibility to support our doctors and hospitals with the affordable Healthcare Equipment Leasing Program.

Connect with an Account Manager today to learn about custom-tailored leasing options for your organization.

About Alliance Funding Group
Alliance Funding Group has been financing small, medium, and enterprise-sized businesses throughout the United States since 1998. Since inception, we have financed over $2B in equipment leases and loans to thousands of customers in small and mid-market arenas throughout the US.

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Buying Equipment from a Private-Party

Buying equipment in a private-party sale can offer a cost-effective way to get what you require to run your business. You can save money on dealer fees, delivery charges and, most importantly, the margin vendors put on top of their equipment price.

In this article, we explain what challenges you may run into and how to pay for your privately purchased equipment.

What is a private-party sale?

A private-party sale is a transaction in which the seller is an individual, not a dealer or vendor. This can typically occur at your local yard sale or on online platforms such as eBay and Facebook Market. Businesses often take advantage of private-party sales to acquire commercial equipment.

What precautions to take?

There are certain risks associated with buying equipment from an individual. While dealers may offer warranties on your purchase, a private-party sale is final. That means it is always better to take some precautions before accepting a pricey piece of equipment “as is.”

First, check the Title. Make sure the equipment belongs to the seller, is not stolen, and fully paid off.

Ask how they purchased it. A legitimate seller should be able to show you the Bill of Sale from the time they bought that piece of equipment.

Check for loans and liens. Ask the seller to verify that there are no outstanding loans or liens with their state’s UCC.

Do not pay cash. Use a payment method that provides evidence of the sale such as check, ACH payment, or a wire transfer.

Inspect the equipment. Ensure your potential purchase’s mechanical condition is sound. Private sellers typically sell the equipment they have used but do not need anymore. They may try to hide some malfunctions to sell faster.

Can I finance equipment purchased in a private sale?

Even when you find a great deal, sometimes, large equipment purchases can be hard on your cash flow. There are two easy options to avoid a financial hit and pay for the equipment over time.

Finance right away

Once you have found some options, you can ask a lender to pre-qualify you. The lender will then quote the maximum amount available to you. After you find the right piece of equipment and agree on the price, you can call the lender to finalize the purchase.

Finance after purchase

Let’s say you did not want to miss a good deal and used your company’s cash reserves to pay for equipment. Now you want to restore the cash balance as quickly as possible. This is called “sale-leaseback”. A financial product that allows you to get back the money you have paid and only make affordable monthly payments.

Who can finance a private-party sale?

At Alliance Funding Group, we have the flexibility to offer a large variety of equipment financing structures.

Talk to our Account Manager today to get pre-qualified for an equipment purchase without affecting your credit.

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What is a Balloon Payment?

A balloon payment structure can be a convenient alternative to a bank loan if you need to start using the equipment as soon as possible or if you are looking for fixed interest and lower rates on your purchase.

A balloon payment is a lump sum payment attached to a lease. It is a payment that you would usually make at the end of the term.

Balloon leases are a hybrid of a traditional lease and a loan. While you make payments based on the depreciating value of an asset during the term, you have the option to buy it at market value or a pre-determined amount when your term expires.

It is a way to start using the equipment you need without a significant effect on cash flow. Instead of immediate down payment, your leasing agreement covers the entire cost of the asset.

Ballon leases are popular among seasonal businesses that may not have the right amount ready when the high season begins. Companies that find a rare deal on equipment may need to act fast and use a ballon lease structure to get what they want. With this financial product, you do not have to come up with a large sum of money upfront or wait weeks for approval.

Others use balloon leasing to try out new equipment that is not otherwise available. Unlike a purchase, they may return the equipment at the end of the lease term. On the other hand, if they choose to keep it, there is an established purchase price to plan for.

Being a privately-owned direct lender, AFG can offer creative deal structures for any business situation. Talk to our experienced Account Manager today!