IT equipment finance – or technology equipment finance – are loans and leases to obtain IT hardware and software for business purposes. Because IT equipment depreciates very quickly, buying it with cash makes poor business sense. It’s far better to pay for your technology over months or years, build upgrades into the finance agreement to slow down obsolesensce, and preserve your valuable working capital for other areas of your business – such as a mergers, marketing, and expansion.

IT equipment finance can help new businesses to secure the technology they need with either an IT equipment finance loan, or an IT equipment lease. What’s the difference between these finance options? See below.

IT Equipment financing

These are loans that allow the borrower to pay for their IT equipment over time, spreading the cost across months or years. In most cases, the borrower pays the loan back, (plus interest and any fees), in fixed monthly instalments. At the end of the loan, the borrower owns the equipment outright. 

Key benefits: Ease the strain on cashflow as you buy the IT equipment you need. Interest is usually a fully tax-deductible expense, and the payments form part of your capital equipment depreciation plan. May offer periodic upgrades to keep your tech up to date. Many IT finance options will offer an automatic buy-back at contract end.

IT Equipment leasing

Similar to a loan, except the borrower (lessee) is not buying the equipment, they are renting it over an extended period. At the end of the rental contract, the equipment will either go back to the lessor (equipment provider), or the lessee may have the option to buy the tech for a pre-agreed sum. May offer periodic upgrades to keep your tech up to date. The lessor may be responsible for maintenance of the IT equipment.

Key benefits: Eases the strain on cashflow. Usually comes with lower monthly payments than IT equipment financing. Does not appear on the company balance sheet as a liability. In most cases, the entire payments, (not just the interest), can be written off as fully tax-deductible expenses.

Software loans

Your IT system is only as good as the software you run on it, which means it is as important to maintain the latest versions of your application and operating programs as it is to have the newest hardware. Even a simple software upgrade can vastly improve your organization’s productivity and efficiency. Once again, instead of paying for new versions of software out of working capital, use a software loan to spread the load. Pay over time. Build automatic upgrades into the contract to keep your software systems at peak performance.