# Equipment loan vs equipment lease for a construction company > Loans and leases are both equipment products, not a sale of future receipts. Compare ownership, residuals, and who pays major repairs before you sign. By Elie Mendlow · Published November 9, 2026 Section: Business Funding › Equipment & Invoice Finance · Series: Contractor Desk (https://mcafax.com/notebook/series/contractor-desk) Canonical: https://mcafax.com/notebook/contractor-equipment-loan-vs-lease Source: MCAFax, The Broker's Notebook (https://mcafax.com/notebook). MCAFax is not a lender or a law firm. --- An equipment loan and an equipment lease both fund a machine, but they split ownership, end-of-term options, and who carries major repair risk differently. For a construction company, compare the payment schedule, residual or balloon, and insurance rules on the same quote package. Neither product is a merchant cash advance, which is generally a sale of future receipts. This is general information, not legal or financial advice. ## What is an equipment loan in plain terms? An equipment loan is debt used to buy the machine. You usually make fixed payments, the lender takes a security interest in the equipment, and you build toward clear ownership as you pay. Down payment, term, and rate vary by lender, credit, age of equipment, and cash flow. Ownership matters when you want to keep the asset for many seasons or sell it later. You also carry more of the maintenance and downtime risk. That tradeoff is normal for excavation, paving, and sitework fleets that keep iron for years. ## What is an equipment lease in plain terms? An equipment lease lets you use the machine for a set term in exchange for payments. Some leases offer a purchase option at the end. Others expect return. Residuals, early termination fees, hour limits, and wear standards can dominate the true cost. Leases can reduce cash due at signing compared with a large purchase down payment. They still require payments in slow months, so idle-season stress tests still apply. ## How should a contractor compare them side by side? Put loan and lease quotes on one sheet with the same machine, attachments, term length, and insurance assumptions. Add expected idle months. Then decide whether ownership value offsets higher upfront cash. Use the contractor hub at https://mcafax.com/notebook/construction-business-loans and the equipment steps at https://mcafax.com/notebook/how-to-get-equipment-financing. Keep MCA-style receipt purchases in a separate column using https://mcafax.com/notebook/equipment-financing-vs-merchant-cash-advance so you do not mix products. ### Worked example All names and numbers are made up. Prairie Frame needs a $92,000 compact track loader. Loan path: 15% down ($13,800), 60 months, about $1,650 per month, ownership after payoff. Lease path: $3,000 due at signing, $1,480 per month for 48 months, $28,000 residual purchase option, return standards on undercarriage wear. Over four years, lease payments total about $71,040 before the residual. Loan payments over five years total about $99,000 plus the down payment, but the company keeps the machine without a residual check. If Prairie expects heavy undercarriage wear, the lease return clause can add end costs the monthly quote hides. If Prairie expects to keep the unit eight years, the loan path may fit better. They reviewed eligible SBA 7(a) purchase uses at https://www.sba.gov/funding-programs/loans/7a-loans and SOP 50 10 8.1 before choosing a structure. A 504 path for major fixed assets is summarized at https://www.sba.gov/funding-programs/loans/504-loans when the project fits that program. ## Which questions belong in the term sheet review? Ask these before you sign either path: - Is title transferring to you subject to a lien, or staying with the lessor? - What is due at signing on each path? - What happens if you return early or lose the job that needed the machine? - Who pays major repairs and what insurance limits are required? - Are attachments and tax or title fees inside the financed amount? When the machine math is clear, browse wider funding types at https://mcafax.com/notebook/where-to-get-business-funding. Do not send bank logins to a cold caller pitching a cut of invoices while you are trying to finance a loader. ## Questions readers ask **Is an equipment lease the same as a merchant cash advance?** No. A lease is tied to use of a machine and end-of-term rules. An MCA is generally a purchase of future receipts with a different payment shape. **Who usually holds title during a loan?** You typically take title subject to the lender lien. Confirm the security interest and insurance requirements in the documents. **Can SBA programs fund a purchase instead of a lease?** SBA 7(a) and 504 can finance eligible equipment purchases subject to underwriting. Confirm current rules in SOP 50 10 8.1 with your lender. **What if I need the attachment package too?** Price buckets, grapples, and other attachments in the same quote. Leaving them out breaks both loan and lease comparisons.