Leasing or credit? – what is more profitable?
Many entrepreneurs, standing before buying a fixed asset for a company, wonder what to choose: leasing or credit ? What will be the most convenient, cheapest and most beneficial solution? Check the differences between an investment lease and an operating loan.
Leasing or credit? – what to consider
When considering loan and leasing, it’s good to consider tax benefits, a list of documents necessary to assess creditworthiness, own contribution or formal and legal effects, such as: investment insurance, contract termination or installments.
What are the advantages of leasing?
When using a lease, the lessee has a specific item at his disposal, without being its owner. The advantage of this form of investment financing is that it is often cheaper than a loan. What’s more, leasing is more available, requires less formalities, and getting it can be really instant. In many cases, the leasing decision takes a few minutes. Leasing also involves additional services, including insurance, vehicle registration, servicing and more. Thus, leasing, apart from the possibility of using given fixed assets, also provides other facilities. See also
According to the Leasing Index 2019 study carried out by Lite lender Leasing, as many as 43% of companies employing up to 49 employees use leasing. In the case of sole proprietorships, around 37% of entrepreneurs use or benefit from leasing. A lot of leasing is also used by companies employing from 2 to 9 people – 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 assess 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 depends on the ownership of the equipment. In the case of an investment loan, the bank often requires the presentation of material collateral, e.g. a mortgage on the property. Unlike leasing, an investment loan requires additional documents, opinions and certificates. Creditworthiness is extremely important because it depends on it the amount of the loan as well as the length of its repayment. In some cases, the available loan amount may not cover the 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.
Cost of getting income
Tax deductible costs are also important when making a decision. In the case of credit, this is the interest part of the installment. It looks different when it comes to leasing, because here you can include the initial payment as well as the entire net leasing installment in accordance with applicable tax regulations.
Leasing or credit?
When comparing investment loan and operational leasing, it is worth considering: formalities, equipment ownership, collateral, tax deductible expenses, and repayment schedule. This combination will allow you to make a good decision that will perfectly match your needs. It is worth spending a little more time on it and analyze all the pros and cons.