Is is better to finance your billboard or digital sign with a bank loan or with a financing lease? It depends on your objectives.
A billboard loan is better if:
- You want long term financing (10 years or more). Billboard loans have terms of 10-15 years versus a 5-7 year term for leases.
- You want to prepay without a horrendous penalty. The sum of all payments language in leases can saddle you with a 20-50% prepayment penalty. Avoid a lease if you intend to sell your company within the next five years.
- You want clean title to your board and landlease. When you borrow you own your assets and simply pledge them to the bank. The leasing company owns your board and often takes an assignment of your landlease until the lease is paid.
- You want to avoid end of lease buyout costs.
A billboard lease is better if:
- You want quick approval. Leasing approvals can happen in 48 hours or less versus weeks for a bank loan. It is quick because the leasing company is underwriting a specific sign, not an entire company.
- You want to finance 100% of construction costs. Most lenders are unwilling to finance more than 75% of construction costs.
- You don’t wish to tie up all your company assets. Lenders will want a blanket security interest in all the assets of your company. Leasing companies will take only certain signs.
- You don’t want to personally guarantee. A leasing company may not require a guarantee because it owns the asset until you are done paying for it. Also, lease documents give creditors more rights in the event of a default or bankruptcy so a personal guarantee is not necessary to make you cooperate in the event of financial difficulties.
I’ve put a detailed powerpoint comparing billboard leases and billboard loans on my website. You can find it here.
