There are two ways for a business to secure equipment: lease or finance.
With equipment leasing, a piece of equipment is rented from a lender for a specific period. In return, the borrower pays the lender monthly payments for the duration of the lease. When the term of the lease ends, the borrower can either renew the lease, purchase the equipment, or return it.
Equipment financing, on the other hand, refers to borrowing money from a lender with the specific purpose of buying a piece of equipment. The financing firm can loan most if not the entire cost of the equipment.
In exchange, you need to pay the loan along with regular interest payments, depending on the terms of the loan.
The difference between equipment leasing and equipment financing lies in the ownership of the piece of equipment. An equipment lease lets you rent a piece of equipment from a vendor, but you don’t own the equipment during the lease term.
You may purchase it if you have that option at the end of the lease agreement. With equipment financing, you will fully own the equipment when you pay the loan according to the agreed terms.