How is a loan different from leasing?

Companies often need to raise additional financing to develop their business and expand their capacities. Most often, the choice is made in favor of a loan or leasing. But in order to choose the most suitable option for the borrower, it is necessary to clearly understand the differences between these two concepts.

Both of these financial instruments are similar, but each has its own characteristics. The main difference is their subject matter. With a loan, the borrower receives money for use, but with leasing, he receives an object he already needs, for example, a car or equipment, for use.

Another important difference is the difference in interest rates. Since, in fact, leasing is a long-term lease, the rates for it are much lower.

In addition, leasing is quite profitable for business. For business entities, the acquired property under leasing is put on the balance sheet and is not taxed. Lease payments include VAT.

But loans also have their advantages. The main thing is that the property purchased with credit money becomes the property of the borrower. Its main drawback is rather strict requirements for the borrower, as well as a strict payment schedule.

If we approach the issue from the point of view of benefits for the borrower, then the answer will be this - leasing is more convenient for enterprises. Since payments can be made in a mode convenient for the organization and carried out as expenses, which will reduce taxation.

Before deciding which form of additional investment to choose, it is necessary to take into account many factors.

It is also worth considering such points as the speed of consideration of the application (in leasing it usually happens faster) and the timing of debt repayment.

Specialists of Law Firm “PARITET” can assist you in preparing and collecting the necessary package of documents for filing an application. We can also provide you with advice on choosing the most suitable type of additional investment for you.