One of the questions we are frequently asked is the type of security equipment we will finance. We finance a broad range of security equipment, everything from cameras, keypads, monitors and security hardware and software. Virtually any tangible asset from $5,000 to $1m. Madison Capital also finances vehicles from 1-500 units.
Another question we are frequently asked is the difference between a loan vs lease? In summary, a loan is the borrowing of money while a lease is a term rental agreement for the use of specific equipment. As a means of financing, loans and leases have benefits and drawbacks. Below are some major considerations affecting your decision.
Rates With a lease payments are generally fixed for the life of the lease unless the lease has special provisions. With a loan rates are usually floating and based on Prime Rate or another index such as LIBOR. As the index fluctuates so does the monthly payment. This is beneficial during periods of falling interest rates, and detrimental when interest rates rise.
Amount Financed With a lease you are able to finance the complete purchase including soft costs and sales tax. Out-of-pocket costs are usually limited to the first month’s investment or a small security deposit. With a loan banks generally lend a portion (60%-80%) of the equipment cost; exclusive of soft costs such as shipping, training, installation, etc.
Extra Costs With a lease 99% of small-ticket equipment leases (up to $75,000) have no origination, commitment or application fees. Documentation fees are minimal, ranging from $95 to $299 depending on the transaction size. With a loan banks use fees to boost their rates of return on loans, including application fees, origination fees, commitment fees, schedule fees, funding fees and charged for expenses associated with approving and executing the loan application.
Available Terms With a lease in most cases you choose the terms, the purchase option, and the down payment of your equipment lease. We offer 60-month terms on most equipment and up to 84 months on some asset classes. Custom terms can easily be arranged. With a loan banks tend to be somewhat less flexible than leasing companies. That’s good if you are looking for a standard term, not so good if you need flexibility.
Speed With a lease more than half of our approvals are issued the same or next day. With a loan banks take longer to make credit decisions. It can take weeks to prepare your request and bring it to the credit committee for review.
Collateral With a lease in most instances, the only collateral is the equipment being leased. With a loan banks usually secure their loans by requiring additional collateral such as real estate, equipment, inventory, receivables or your house. In fact, it is common practice for banks to file a blanket lien against all assets of your company.
Restrictive Covenants Bank loans often require the borrower to maintain certain minimum financial ratios and report them to the bank on a quarterly or semi-annual basis. If the borrower fails to maintain those ratios the bank can call the loan. They can also place restrictions on or limit future borrowings from any institution. With a lease there generally are no such restrictive covenants.
Madison Capital also works with vendors of security products and services. We have a vendor program to support vendors of security equipment. More details of our vendor program and information on how to apply can be found here.
For more information on security equipment leasing see our video.