Cutting-edge lab equipment powers innovation in life sciences, from advancing drug discovery to manufacturing medical devices and diagnostics. But these essential tools often come with steep price tags, leaving many businesses wondering: how can we afford the equipment we need without compromising our financial health?
Purchasing equipment outright can tie up working capital and strain your budget. In fact, in 2023, 82% of U.S. businesses used some form of financing—such as loans, leases, or lines of credit—to acquire equipment and software, highlighting the prevalent need for alternative financing solutions.
To navigate these financial challenges, many biotech and life sciences companies turn to equipment leasing or equipment financing. These strategies enable access to necessary tools without the financial burden of an upfront purchase. While both options facilitate innovation, they operate differently and offer unique advantages depending on your specific circumstances.
So, how do you decide which is right for your lab? This guide will cover:
Let's dive in. By the end of this post, you’ll have the clarity to make an informed decision that aligns with your goals and operational needs.
Equipment leasing allows businesses to rent essential equipment for a specific period of time rather than purchasing it outright. Unlike a loan, where you borrow funds from a lender to buy equipment, a lease involves making periodic monthly payments to use the equipment without assuming ownership upfront.
At the end of the lease term, the lessee (the business renting the equipment) typically has options, such as:
Leases are often categorized into two main types:
One of the biggest advantages of leasing is the ability to preserve working capital while enjoying lower monthly payments compared to traditional loans. This makes leasing particularly appealing for businesses that need access to expensive equipment, such as lab instruments, without the burden of high upfront costs.
Additionally, leasing can help avoid risks associated with depreciation and obsolescence. Many leases include maintenance and repair services, ensuring that the piece of equipment stays in optimal condition throughout the lease period.
Interested in learning more about capital leases and operating leases? We cover the differences between them here.
Equipment financing enables businesses to acquire essential tools by borrowing funds to purchase them outright. With an equipment loan, you work with a lender to secure financing for the value of the equipment, which you then pay back over a set period of time through monthly payments that include principal and interest rates.
Unlike leasing, equipment financing allows you to gain full ownership of the equipment once the loan is repaid. However, this often requires a significant down payment upfront, and the repayment terms—such as loan amount, fixed rate or variable interest, and loan terms—depend on your business’s credit score and financial profile.
Here’s what you can expect from financing equipment:
Equipment financing is well-suited for businesses investing in tools with a long useful life or those looking to build long-term assets. It’s an ideal choice if you prefer ownership of the equipment and your cash flow can handle the larger upfront and ongoing costs. For small businesses, loans from the Small Business Administration (SBA) can provide additional support with favorable terms.
While Excedr specializes in providing flexible equipment leasing solutions through our leasing program, it’s important to understand other financing methods available for acquiring lab equipment. Here’s a quick overview of some common options:
Equipment loans are what most people think of when they hear “equipment financing.” A lender provides a loan, often requiring a down payment of up to 30%. The loan term typically ranges from 3 to 10 years, with longer terms available for SBA loans.
The Small Business Administration (SBA) offers programs like the CDC/504 loan, designed to help businesses finance equipment purchases with favorable terms.
A business line of credit (LOC) or credit card provides flexible access to funds for smaller equipment purchases. LOCs allow you to draw funds as needed, while credit cards offer the convenience of direct purchases.
Nontraditional lenders offer faster approval and more flexibility than banks, making them a popular choice for businesses needing quick access to funds.
For most biotech and life sciences companies, equipment leasing through Excedr offers significant advantages over other financing methods. Our flexible payment terms, fast approvals, and industry-specific expertise make it easier to equip your lab without the burdens of high upfront costs or restrictive loan requirements.
While both equipment leasing and financing provide access to the tools your lab needs, the two options serve different financial and operational goals. Here’s how they compare:
Leasing is a great option if:
With leasing, you make regular payments to use the equipment without taking on ownership. At the end of the lease, you may have the option to return the equipment, extend the lease, or purchase it at fair market value.
Financing may be better suited for:
By financing, you’ll own the equipment outright after paying off the loan, which can be advantageous for instruments that retain value over time.
If you’re deciding between the two, consider:
Choosing the right option depends on your business’s financial goals, operational needs, and growth plans. Here’s what to consider:
If preserving working capital is critical, leasing is often the better choice. With lower upfront costs and monthly payments, leasing helps you free up cash for other priorities like R&D, hiring, or scaling operations.
Consider how long the equipment will remain valuable to your business. For short-lived or rapidly evolving technology, leasing offers the flexibility to upgrade at the end of the lease. For equipment with a long useful life, financing might be the smarter investment.
Are you planning for rapid growth or focusing on stability? Leasing aligns well with businesses that expect changing needs, while financing suits those with predictable, long-term requirements, where ownership of the equipment is more important. Financing allows you to build long-term assets, but it also means you’ll bear the risks of depreciation.
Leasing agreements often include maintenance and repair services, reducing unexpected costs. If the equipment requires frequent upkeep, leasing can be more cost-effective than owning.
Leasing payments are generally tax-deductible as operating expenses, making them attractive for businesses looking to reduce taxable income. With financing, you can claim depreciation and interest, which may or may not be as advantageous depending on your financial structure.
For biotech and life sciences companies, the decision to lease or finance equipment carries unique challenges and opportunities. Here’s why it matters:
The biotech industry relies on cutting-edge instruments like mass spectrometers, analyzers, and sequencers. These technologies evolve quickly, and leasing ensures you can upgrade to the latest models without being stuck with outdated equipment.
Lab equipment such as HPLC systems, centrifuges, and incubators often come with significant price tags. Leasing minimizes upfront costs, allowing biotech companies to allocate resources to R&D, hiring, and other critical areas.
In an industry where research outcomes are uncertain, large capital expenditures can be difficult to justify. Leasing spreads out the financial commitment over time, reducing risk and maintaining flexibility.
Leased equipment often includes maintenance and calibration services, ensuring instruments meet regulatory standards. This is critical in life sciences, where compliance impacts everything from product development to clinical trials.
For startups, acquiring essential equipment can be one of the biggest financial challenges. Limited operating history, constrained working capital, and the need for flexibility all shape how business owners approach equipment acquisition. Here’s how equipment leasing and equipment financing can support startups:
Leasing provides startups with lower monthly payments compared to traditional financing. This flexibility helps preserve working capital for critical areas like hiring, product development, and research.
Startups often face challenges securing business loans or a line of credit due to limited credit history. Leasing companies, like Excedr, typically have a more streamlined application process, making it easier to acquire the types of equipment you need without the lengthy approval times associated with traditional loans.
Leasing equipment doesn’t add debt to your company’s balance sheet. This makes it easier to maintain a strong financial profile, which can be critical when seeking additional funding from investors or lenders.
Leasing is an ideal solution for startups experiencing rapid growth. It allows you to scale operations without committing to ownership of the equipment or long-term liabilities. Additionally, leasing provides flexibility for short-term projects or trials where equipment is only needed for a limited period of time.
Leasing allows startups to retain full ownership of their business, unlike venture capital funding, which requires giving up equity. This means you can secure essential equipment without sacrificing control over your company’s future. In a capital-intensive industry like biotech, leasing provides startups with the financial flexibility, scalability, and reduced risk they need to succeed.
Acquiring the right equipment for your business doesn’t have to strain your budget or tie up your working capital. Both equipment leasing and equipment financing offer tailored financing solutions to meet the unique needs of your lab or startup. Leasing solutions provides the flexibility of lower monthly payments, minimal upfront costs, and the option to upgrade equipment when technology evolves. Financing, on the other hand, allows you to gain ownership of the equipment, making it a long-term asset for your business.
By evaluating your business needs, cash flow, and growth plans, you can determine which approach aligns best with your goals—whether that’s minimizing risk or investing in the future.
Looking for a smarter way to equip your lab? Excedr can help.
