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Every small business depends on equipment of some kind. Many small businesses use several different types of equipment. The cost of these assets can vary from small to hundreds of thousands of dollars. Small business loans are often the only way you can afford the equipment you need. But is leasing a better financing option?

If you’re in the construction business, every piece of machinery is very expensive. Even large firms usually have to finance their equipment in some way. But not every small business needs heavy-duty machinery or vehicles. What if you need office equipment? Or kitchen equipment? Or tools? These items don’t cost nearly as much as a dozer or a wheel loader. So you have more options when it comes to financing.

With the right small business loans, you can retain vital working capital and get the equipment you need. You can stay focused on putting that new equipment to work growing your business.


Sometimes you have the luxury of advance planning. You know you’ll need new equipment. But not till next year. You have time to save up. Or apply for a traditional business loan from a bank. The SBA backs working capital loans you can use for equipment through their 7(a) program. They also offer equipment financing through their CDC/504 program. These small business loans are excellent options. As long as you have two or three months to apply and get a response.


Sometimes, time is your enemy. Equipment fails. Or you need more equipment to handle unexpected new work. You need it now. I’m happy to say you have options.

If you need as much as $350,000 I might recommend SBA Loans. Your business must have good credit and meet other criteria. But instead of waiting months, you can get funded in just seven days.

If this doesn’t work for you, I might recommend an unsecured option such as:

  • Accounts receivable financing
  • Merchant cash advances
  • Short term business loans
  • Business lines of credit
  • Business credit cards

Whether any of these business loans make sense for you depends on the amount you need and your current business debt situation.


When you need equipment, you want to get the best financing deal possible. That might mean leasing instead of buying. Leasing is fast, so it can work even if you’re in a hurry.

Leasing is much cheaper up front than an outright purchase. The lease may or may not require a down payment, then you’ll make monthly payments. Outright purchase may use up a significant amount of your cash. To compare leasing to a business loan, you will want to look at every cost associated with each option.

The US Small Business Administration has some advice if you choose to lease. “If you anticipate needing the equipment for the long-term and want to establish equity in it, try to negotiate a purchase option under which a portion of your lease payments is credited to the purchase price.” That way, if you do buy the equipment at lease-end, you’ll owe less. You can consider small business loans for that amount, or simply pay it off if you can.


QuickBooks notes, “Beyond simply weighing the overall costs of buying or leasing a piece of equipment, you also need to consider maintenance, tax deductions, flexibility and more. … In Certain circumstances, the cost-benefit of one option may strongly outweigh the other.”

Leasing offers distinct benefits:

  • Maintenance and repairs are usually included. That saves you money.
  • Lease-related costs are considered operations expenses on your balance sheet, not capital expense. They may be 100% tax-deductible.

Leasing is a good choice for:

  • Equipment that becomes outdated before it wears out. Short replacement cycles for things like technology-based tools and equipment can kill your cash flow. Leasing allows you to upgrade frequently without the cash outlay.
  • Test-driving equipment to see if you really want to own it long term. At the end of the lease, you can buy the leased equipment. Or you can buy a brand new model. Either way, small business loans can help you get the right financing.

There’s a downside to leasing, though.

  • Total cost of ownership will be higher.
  • You don’t own the equipment, so you have no control over it. Typically, you cannot make modifications.
  • The post-lease purchase price might be more than you want to pay.
  • You cannot depreciate leased equipment.

Buying is better if you expect to own the equipment a long time. (And you can sell it later, if you want, to recoup some of the cost.) You’ll have to budget for maintenance and repairs, though.

All that said, there is no right or wrong answer. There are just too many variables. And your small business and current circumstances are unique. So the best deal for you – right now – could be a wrong choice for another small business owner. Writing for Entrepreneur, Pam Newman says, “The key to making the right decision is understanding exactly what your company’s needs are and the purpose of the asset.” She suggests you consider:

  • How long you do you expect to keep the item
  • If the item is subject to frequent necessary updates
  • Buy versus lease financing options
  • Buy versus lease tax benefits
  • Revenue this equipment will earn for you


Barbara Weltman is an attorney and business advisor. She suggests, “Instead of simply buying a brand new item from your local dealer, consider some alternative ways to get what you need for little or no money.” She recommends buying used instead of new. Restaurateurs and contractors often do this, especially for specialty items. You’ll have a lot less to finance. She also suggests you think outside the box. Buy government surplus from local, state and federal agencies that sell used, unneeded and seized equipment. Or trade goods and services with other local small businesses.

At United Capital Source, we give unbiased advice to all types of small businesses looking to grow their business. We can help you choose wisely between leasing and buying. And we can match you with the most cost-effective small business loans to secure the equipment you need, when you need it.

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