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Financing professional assets is an ongoing challenge for businesses, whether it involves office furniture, industrial machinery, or technological equipment. For many companies, investing in costly equipment while preserving cash flow can be a real headache. This is where leasing becomes an attractive financing solution.
Leasing allows companies to access modern, high-performance equipment without tying up significant capital upfront. In this article, we will detail how leasing works, its benefits, the types of leasing available, and compare it with other financing solutions such as bank loans or lines of credit.
What is Leasing?
Definition and Principles
Leasing is a financial rental agreement whereby a company (called the lessee) can use a professional asset purchased by a financing company (called the lessor). The term of the lease usually ranges from 24 to 60 months, depending on the type of equipment and the company’s needs.
At the end of the contract, the company has three options :
- Exercise the purchase option to become the owner of the asset at a predetermined residual price.
- Return the asset and, if desired, enter into a new lease for more up-to-date equipment.
- Extend the lease if the asset still meets business needs.
This flexibility makes leasing an intelligent alternative to outright purchases.
How Does Leasing Work?
The process of setting up a lease typically follows several steps :
- Identifying needs : The company determines the type of equipment required.
- Choosing a supplier : It selects the supplier of the asset.
- Negotiating with the lessor : The financing company purchases the asset and establishes the payment terms.
- Signing the contract and delivery: The asset is made available to the company.
End of contract : The company decides whether to purchase, renew, or return the asset.
Benefits of Leasing
1. Preserving Cash Flow
One of the main advantages of leasing is that it avoids a large upfront payment. Rather than spending tens of thousands of dollars on office furniture or technology equipment, the company can spread the cost over several years. This approach frees up cash for other strategic investments.
2. Financial and Budgetary Flexibility
Leasing allows payments to be aligned with cash flow, typically through monthly or quarterly installments. This makes financial planning far more predictable and simpler compared to an immediate purchase or traditional bank loan.
3. Tax Benefits
In most cases, lease payments can be tax-deductible as operating expenses, reducing the taxable income and helping optimize corporate tax management.
4. Access to Modern Furniture and Equipment
The world of work is evolving rapidly, with growing demands for remote work, ergonomic solutions, collaborative spaces, and high-performance technology. Leasing allows companies to equip themselves with ergonomic furniture, adjustable desks, and innovative solutions without locking up large amounts of capital.
This approach helps create modern, attractive workspaces while keeping pace with design and ergonomics trends.
5. Easily Renew Equipment
Leasing allows companies to regularly modernize their furniture and equipment, typically every 3 to 5 years, without managing resale or accounting depreciation of outdated assets. This fosters innovation, employee well-being, and makes the company more appealing to top talent.
6. Simplified Administrative Management
The leasing company often handles purchase and billing, and sometimes even maintenance. This reduces administrative burden and simplifies asset management for the company.
7. Does Not Affect Your Line of Credit
A frequently overlooked benefit of leasing is that it does not affect your bank line of credit. Unlike a line of credit or certain loans, a lease is a separate financial commitment that does not reduce your borrowing capacity with your financial institution.
For growing businesses, this is particularly strategic :
- You can equip or modernize your offices without compromising access to traditional bank financing.
- Preserve your line of credit for day-to-day operational needs.
- Maintain a strong financial position with lenders, since available credit remains intact.
Leasing vs. Bank Loans vs. Line of Credit
To help companies choose the most suitable financing option, it’s important to understand the differences between three commonly used solutions : leasing, bank loans, and lines of credit.
Each solution meets different objectives in terms of cash flow, flexibility, and asset management. The table below highlights the main characteristics, advantages, and limitations to facilitate decision-making.
| Criterion | Leasing |
Bank Loan | Line of Credit |
| Nature of financing | Rental with purchase option |
Fixed-term loan |
Revolving line of credit |
| Ownership of asset | Lessor owns until purchase option is exercised | Company owns from the start | Company owns the purchased asset |
| Impact on cash | Low : predictable, spread-out payments |
Medium to high depending on amount borrowed |
Variable depending on usage |
| Impact on borrowing capacity | Generally does not affect your line of credit |
Reduces borrowing capacity |
Directly uses your credit capacity |
| Ideal for | Office furniture and professional equipment, regular modernization |
Long-term asset acquisition |
Short-term or unexpected cash needs |
| Disadvantage | Asset is not immediately owned |
Ties up capital, direct debt |
Can encourage overuse of credit |
Interpretation of Differences
Leasing is particularly suitable for companies that want to preserve cash flow, access modern equipment, and maintain flexibility for periodic upgrades. It is a strategic solution for organizations investing regularly in furniture, technology, or professional equipment.
Bank loans are better for companies prioritizing immediate ownership and willing to tie up capital. They are suited for long-term structural investments but offer less flexibility for equipment upgrades.
Lines of credit are useful for managing short-term cash needs or unexpected expenses, but they are less suitable for structured financing of professional assets over multiple years.
Conclusion
Leasing stands out as an effective and flexible financing solution for companies that want to modernize their furniture and equipment while optimizing cash flow. Compared to bank loans, it limits direct debt and facilitates regular asset renewal. Compared to a line of credit, it offers better budget predictability and a structure better suited for material investments.
FAQ: Everything You Need to Know About Leasing
1. What is the typical duration of a leasing contract?
Generally between 24 and 60 months, depending on the type of equipment and the company’s needs.
2. Can a lease be terminated early?
Yes, but it may incur penalties or additional fees. Conditions vary depending on the lessor.
3. What types of assets can be financed through leasing?
Leasing can finance office furniture, IT equipment, industrial machinery, professional vehicles, and, in some cases, real estate assets.
4. Is leasing suitable for startups?
Yes. It allows young companies to quickly equip themselves without straining initial cash flow or impacting their line of credit.
5. What tax benefits does leasing offer?
Lease payments are generally considered operating expenses, which can reduce taxable income.
6. What are the main differences compared to a bank loan?
Leasing offers more flexibility, facilitates equipment renewal, and does not require immediate capital outlay, unlike a bank loan.
