Business Loan vs Equipment Leasing in Canada

The decision that shapes cash flow for years

Whether you’re adding a tandem-axle tractor, a CNC mill, or a new line of kitchen equipment, the financing structure you choose—business loan or equipment lease—will define your monthly cash flow, taxes, and upgrade flexibility. This guide gives you a clear, analyst-grade framework to pick the right path, model payments, and get approved fast.

If you want quick numbers while you read, run scenarios in the financing calculator. For asset-specific options, start with Equipment Financing, including Equipment Loans and Equipment Leases.

Quick definitions (so we’re on the same page)

• Business loan (term/secured/unsecured): Lump-sum financing with fixed payments over a set term. Ownership is yours from day one (subject to any security). See Term Loan, Secured Loan, and Unsecured Loan.
  
  
• Equipment loan: A term loan specifically tied to an asset. Fits long-life equipment you’ll keep. Learn more.
  
  
• Equipment lease: You pay for the use of the asset; ownership is optional at term end via a buyout (e.g., $10, 10%, or FMV). Often lowers monthly payments and enables upgrades. Learn more.
  
  
• Conditional Sales Contract (CSC): A hybrid where title transfers after final payment—useful when you want ownership with structured, lease-like payments. Details.
  
  

The analyst framework: how to choose in minutes

Use these six filters to get to an answer quickly:

1. Ownership horizon: If you’ll keep the asset 5–10 years (e.g., trailers, shop presses), loans or CSCs often win. Shorter horizons or frequent upgrades favour leases.
   
   
2. Cash flow priority: If the lowest monthly payment is critical, leases with a residual typically reduce the monthly outlay versus a loan of the same term.
   
   
3. Technology pace: Tech-heavy assets (POS, imaging, telematics) age fast—leasing preserves upgrade flexibility.
   
   
4. Tax treatment: Many leases can be expensed; loans generally rely on interest + CCA/depreciation. Confirm with your accountant; model both in the calculator.
   
   
5. Balance sheet & bank covenants: Some lease structures can be lighter on certain ratios; loans build equity.
   
   
6. Speed & documentation: Both can move in 24–48h when files are clean. Asset-specific leases may be faster if collateral is strong and specs are complete.
   
   

Side-by-side comparison (at a glance)

Run both versions in the calculator (e.g., 60-month loan vs. 60-month lease with 10% buyout) to visualize payment and total cost.

When a business or equipment loan is the smarter call

Choose a loan (or CSC) when:

• You’ll run the asset for the long haul. Triaxles, dry vans, presses, racking, or ovens that remain productive for 7–10+ years.
  
  
• You want balance-sheet equity. Ownership supports future borrowing capacity.
  
  
• You want simple end-of-term outcomes. No buyout; you already own it.
  
  

Relevant options:

• Equipment Loans for asset-tied purchases.
  
  
• Term Loan for broader expansion with multi-year payoff.
  
  
• Secured Loan if you want sharper pricing and can pledge collateral.
  
  
• Unsecured Loan for speed when collateral isn’t practical.
  
  

When an equipment lease clearly wins

Leasing is compelling when:

• Cash flow is king. Residuals cut the monthly payment, freeing working capital for payroll, fuel, or materials.
  
  
• You expect to upgrade. Tech or regulatory changes (e.g., telematics, emissions) argue for a planned refresh cycle.
  
  
• You want expense-style treatment. Many structures keep accounting straightforward (confirm with your accountant).
  
  

Useful pathways:

• Equipment Leases for flexible buyouts.
  
  
• Conditional Sales Contracts when you want ownership with predictable, lease-like payments.
  
  
• Hospitality needs? Consider Rent-to-Own (Hospitality) to minimize upfront costs.
  
  

Hybrid strategies that often beat either/or

• Sale-Leaseback on owned equipment: Unlock equity today, keep using the asset, strengthen cash for growth. Refinancing & Sales-Leaseback.
  
  
• Equipment Line of Credit for rolling purchases: Draw only when you buy; repay as projects complete. Equipment Line of Credit.
  
  
• Working capital paired with equipment financing: Finance the machine; use Working Capital Loan for deposits, installation, inventory, and first payroll.
  
  
• Receivables relief: If collections lag, layer Invoice/Freight Factoring to smooth cash while you scale.
  
  
• Asset-based facilities: For manufacturers/wholesalers, Asset-Based Lending can fund AR/inventory alongside your fleet or machinery plan.
  
  

Industry-specific guidance (what tends to work best)

• Transportation & Trucking: Tractors, reefers, and trailers have robust resale; leasing can reduce payments and align with refresh cycles. If you plan to hold trailers long-term, loans/CSCs also pencil well. Transportation & Trucking.
  
  
• Construction & Contractors: For excavators, skid steers, telehandlers—pick based on utilization and life. Long-life earthmoving often fits loans; tech-sensitive or job-specific gear leans lease. Construction & Contractors and Construction Equipment Expertise.
  
  
• Manufacturing & Wholesale: Blend: loan for core machines; asset-based lines for inventory/AR; lease for automation/controls that change quickly. Manufacturing & Wholesale.
  
  
• Hospitality & Food Service: Ovens, refrigeration, and POS refresh often—lease or rent-to-own keeps payments light and upgrades manageable. Hospitality & Food Service.
  
  
• Medical, Dental & Wellness: Imaging and chair/handpiece cycles differ; leases can mirror tech cycles while preserving cash for staffing and marketing. Medical, Dental & Wellness.
  
  

Before you move, make sure your purchase qualifies: Eligible Equipment. Mehmi also sells equipment directly—browse our inventory.

Speed matters: packaging your file for 24–48h decisions

Clean files fund faster—here’s the tight version of the checklist:

• 3–6 months business bank statements (PDF, consecutive months).
  
  
• Equipment quote/spec sheet with make/model, year, hours/km, options, serials.
  
  
• Use-of-funds summary (4 lines): what, why, when, expected ROI/cash-flow coverage.
  
  
• Insurance plan (binder ready; lender as loss payee).
  
  
• For loans: company financials (if available), and any collateral list (for secured options).
  
  

If you’re buying from Mehmi’s inventory, we’ll issue the final invoice and serials to streamline the process.

Case study: The hybrid that unlocked growth

Company: Ontario pallet manufacturer
Need: Add a used forklift fleet and a bandsaw line for a distribution contract.
Constraints: Seasonal receivables; CFO wanted low monthly payment for the first 12 months.
Approach:

• Modeled a 60-month loan vs. a 60-month lease with 10% residual in the calculator.
  
  
• Chose lease for forklifts (lower payment, easier tech refresh), equipment loan for the saw line (long life, high utilization).
  
  
• Added a small Working Capital Loan for initial inventory and staffing.
  Outcome: Equipment delivered on schedule; contract launched with a 15% cash-flow cushion. After year one, they refinanced residuals into a simpler structure using Business Refinancing.
  
  

FAQ: Loan vs. Lease

Is leasing always cheaper than a loan?
Not always. Leases usually reduce monthly payments via a residual, but total cost depends on term, rate, and buyout. Model both in the calculator.

Can I finance used equipment?
Yes—both loans and leases can work for used assets (subject to age/condition). Start here: Equipment Financing.

What terms are typical?
Most SME files range 24–72 months. Choose the shortest term your cash flow comfortably supports—or a mid-term if you value margin protection.

How fast can I be approved?
Clean packages often see decisions in 24–48 hours. Send statements and full equipment specs up front via Contact Us.

Can I combine options?
Yes. Many clients mix a lease (for monthly relief) with a loan (for long-life assets), or add Invoice/Freight Factoring to speed collections.

What if I already own equipment but need cash to expand?
Consider Refinancing & Sales-Leaseback to unlock equity while keeping assets in service.

Ready to run the numbers and choose confidently?

Use the calculator to compare a loan vs. lease (try 48/60/72 months and a 10% buyout). If you want a fast, structured recommendation tailored to your cash flow and industry, feel free to contact our credit analysts via Contact Us.

Are you looking for a truck? Look at our used inventory.

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