How Does Apple Business Financing Work?

For business owners who rely on Apple computers, tablets, phones and more, the tech giant offers financing programs to help with the cost of keeping that technology current. Apple business financing allows companies to lease a variety of products through First Citizens Bank (NC), a commercial bank. Leasing means avoiding a large cash outlay, but it sometimes costs more in the long run. We’ll help you decide if Apple small business financing is right for you and offer some alternatives.

What is Apple business financing?

Apple’s business financing program allows businesses to lease Macs, iPhones, iPads, Apple Watches and Apple TVs. Instead of sinking a significant amount of cash into purchasing equipment, companies can apply for financing by calling CIT at 1-800-854-3680 or applying in person at the nearest Apple store. Businesses make monthly payments directly to CIT over the lease term. When the lease term ends, the company can return the equipment, purchase it or renew the lease, depending on which program it chooses.

Apple lease programs

There are two options for small- and medium-sized businesses that want to lease equipment. The type of lease you choose determines the price you’ll pay if you want to purchase the equipment when the lease runs out.

Business Leasing Program – $1 Buyout

The $1 Buyout program offers fixed monthly payments followed by full equipment ownership. This is a good option for companies that intend to keep the equipment longer than the 12, 24 or 36-month periods.

In this lease, the buyout terms are included in the initial lease agreement, so there’s no uncertainty about the equipment’s final purchase price. This can help you build predictability and stability into your company’s technology budget.

Business Leasing Program – Fair Market Value

The Fair Market Value program offers fixed monthly payments with an option to return the equipment, renew the lease, or purchase the equipment at its fair market value at the end of the lease term. Fair market value is the price that equipment would sell for on the open market.

In this type of lease, there is some uncertainty as to the equipment’s final purchase price. In exchange for that uncertainty, the monthly payment is lower.

Net-Term Purchasing Program

Apple’s purchasing program provides business owners with full ownership of their products and 30 days from the invoice date to pay the balance. There is no cost for this program, but the minimum order total is $10,000, and it’s only available to businesses with over 500 employees.

Equipment leasing vs. buying

When your business needs new Apple technology, should you take advantage of Apple lease programs, net terms or simply buy the equipment outright?

pros of equipment Leasing

Leasing can be especially attractive to companies that want to keep costs low in the near future because you can spread the cost of ownership over several months instead of tying up your cash in a purchase. It can also be a good option for companies for which having the most up-to-date technology is a high priority because you can replace the leased equipment with a newer version when the lease term ends.

cons of equipment leasing

However, companies sometimes end up paying more than the original cost of leased equipment. This is because equipment leasing is similar to a loan, but instead of buying the equipment and paying it off over time, you’re renting the equipment and interest is built into the lease payments.

Apple leasing vs. buying

To help you decide whether you should lease or buy, we compared the cost of several popular Apple business products. While information on the price of Apple products is readily available, Apple and CIT do not publicly disclose lease payments or interest rates. Instead, we used the minimum interest rate CIT extends to customers for other small equipment loans: 6.49%, and the longest Apple lease term available, 36 months, to give you an idea of what Apple leasing might cost. Actual costs may vary depending on your business’s credit, interest rates in effect at the time of lease closing, and whether you choose a $1 buyout or fair market value lease option.

*Prices current as of Jan. 15, 2021

Pros and cons of Apple small business financing

If it costs more, why would you lease Apple equipment instead of buying it? Let’s take a closer look at some of the positives and negatives.

Pros

Easy upgrades. Technology becomes obsolete quickly, which means it can be a bad investment in the long term. Leasing equipment allows you to update your tech every few years without having to repurchase new equipment.

Lower upfront costs. Cash flow is a constant challenge for many small businesses. Leasing allows you to avoid investing a big lump sum into technology and instead spread the cost over several months or years.

Easier planning and budgeting. Leasing equipment gives you predictable monthly payments. It’s easier to plan for the future and budget for your technology spending because you know what the costs will be.

Cons

More expensive. While you don’t pay interest on an equipment lease the way you would on a loan, leases may have effective interest rates built into their monthly payments. This is how the leasing company makes money. Even when interest isn’t built in and you have the option to return the equipment, you may still need it for your business — your choices are to buy the equipment, continue the lease or return it and buy elsewhere.

Tough to get out of. If you decide you no longer need the equipment, there may be consequences for returning your leased equipment early. Some leases have clauses that charge a percentage of your remaining lease payments if you terminate the lease early. Businesses may be able to negotiate the early termination penalty before signing the lease.

Good credit needed. Although credit requirements for leasing tend to be less stringent than for small business loans, a poor credit score can still make it tough to qualify for a lease.

Alternatives to Apple financing

You don’t have to go through Apple or its partnership with CIT if you want to finance your new Apple laptop, phone or other device. In fact, it’s always a good idea to shop around to ensure you’re getting the best terms and best rates. With that in mind, here are a few competitors to  consider.

National Funding

National Funding offers leases for computers and other technology tools for businesses. To qualify, you must have been in business for at least six months and have a FICO Score over 575.
Minimum order: $10,000

Kapitus

Kapitus offers leases on everything from farm equipment to laptops. To qualify, your company must have been in business for at least two years. You can finance up to $150,000 with a FICO Score greater than 675, or more than $150,000 with a FICO Score greater than 675.
Minimum order: $5,000

SmartBiz

SmartBiz doesn’t offer leases, but it does issue Small Business Administration (SBA) loans. You can borrow anywhere from $30,000 to $5,000,000 and make payments over 120 to 300 months. To qualify, you need to have been in business for at least two years, have no outstanding tax liens, no foreclosures or bankruptcies in the past three years, and be able to demonstrate enough cash flow to support your payments.

Business credit cards

A low-APR business credit card can also be an option for financing the cost of tech equipment for your business. However, the average interest rates available on a business credit card currently range from 13.12% APR to 19.87% APR. That may be significantly higher than the effective interest rate included in an equipment lease. Also, you’re purchasing the equipment rather than leasing it, so it might not be as easy to upgrade your technology every few years.