Lease payments either act as rental payments through an operating lease or repayments with interest through a capital lease. Loan payments are repayments with interest that reduce the principal of your client’s loan

Lease: The leasing company owns the equipment during the lease and your client pays the equivalent to rental payments; however, most leasing companies provide the option to purchase the equipment at the end of the lease term. Loan: During a loan, your client assumes all ownership responsibility of the equipment.

Lease: No down payment is usually required but lately due to slow economy we have seen 5-10% large first payment requests from the lenders. Loan: Loans usually require a down payment. Your client will then finance the remaining equipment cost.

Your client can usually structure payments to best match their cash flow with monthly, seasonal, semi-annual, or annual payments. Your client will generally pay monthly but depending on the flexibility of their financial institution, you may structure the payments to better match your client’s cash flow.

A lease usually requires no collateral since the equipment leased serves as collateral. Depending on their credit, your client may need to pledge other assets as collateral before securing financing.

Lease: With an operating lease, your client will make the equivalent of rental payments for the equipment, and your client can often write off the full portion of lease payments as an expense. With a capital lease, your client will assume liabilities of ownership for accounting purposes; however, they can likely deduct the full amount of lease payments. Loan: Your client will claim tax deductions for the interest paid on the loan and, since they own the equipment, they will amortize the equipment over its useful life. This means they will write off the annual amortization based on the equipment’s Capital Cost Allowance determined by Canada Revenue Agency. ***always advise your client to consult their own professional tax, legal and accounting advisors before they engage in any transaction. Remember to not provide any advice for which they can later blame you and prove the blame. ****

Lease: Your client can regularly trade up their equipment at the end of lease and structure new financing. Sometimes, it’s even possible to refinance a trade up during the lease, protecting your client from the equipment becoming outdated. Loan: Because your client assumes full ownership with a loan, your client is left with the equipment and bear the risk of obsolescence.

Lease: Leasing preserves your client’s line of credit for other opportunities and/or emergency needs. Loan: Your client may increase their credit exposure if they secure a loan at the same institution where they hold a line of credit.