Leasing or credit? - what are the differences between them?

Service Business

Many entrepreneurs, faced with the purchase of a fixed asset for a company, wonder what to choose: leasing or credit? What solution will be the most convenient, cheapest and bringing the greatest benefits? Check the differences between an investment lease and an operating loan.

Leasing or credit? - what to consider?

When considering between a loan and leasing, it is good to take into account tax benefits, a list of documents necessary to assess creditworthiness, own contribution or formal and legal effects, such as: investment insurance, method of contract termination, or the amount of installments.

What are the advantages of leasing?

When taking advantage of a lease, the lessee has a specific item without being its owner. The advantage of this form of investment financing is that it is often cheaper than in the case of a loan. What's more, leasing is more accessible, requires less paperwork, and getting it can be really lightning fast. In many cases, the decision to grant a lease takes a few minutes. Leasing also involves additional services, such as insurance, vehicle registration, servicing and more. Thus, leasing, apart from the possibility of using given fixed assets, also provides other amenities.

According to the "Leasing Index 2019" study carried out by Santander Leasing, as many as 43% of companies employing up to 49 employees use leasing. In the case of sole proprietorships, leasing is used or used by approximately 37% of entrepreneurs. Companies employing from 2 to 9 people also use leasing a lot - 43%, and in the case of those with 10 to 49 employees - 46%. The latter group most often considers this form of financing in their company. 83% of customers positively evaluate the use of leasing during the term of the contract.

Credit - is it worth it?

When to choose a loan? Definitely in a situation where the company cares about the ownership of the equipment. In the case of an investment loan, the bank often requires the provision of tangible securities, e.g. a mortgage on real estate. Unlike leasing, an investment loan requires additional documents, opinions and certificates. Creditworthiness is extremely important, because it determines the amount of the loan and the length of its repayment. In some cases, the available loan amount may not cover your entire investment. It is also necessary to pay your own contribution. Its amount depends on the offer, but it can be up to 20% of the investment.

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Cost of getting income

Tax-deductible costs are also of great importance when making a decision. In the case of a loan, it is the interest part of the installment. The situation is different when it comes to leasing, because here the initial payment can be included in the tax deductible costs, as well as the entire net leasing installment in accordance with applicable tax regulations.

Leasing or credit?

When comparing an investment loan and operational leasing, it is worth taking into account: formalities, equipment ownership, security, tax deductible costs, as well as the repayment schedule. Such a combination will allow you to make a good decision that will perfectly suit your needs. It is worth spending a little more time on this and analyzing all the pros and cons.