For life science startups and scaling labs, the question isn’t whether you need top-tier equipment—it’s how to afford it without putting your budget at risk.
Mass spectrometers, centrifuges, HPLCs—they’re essential to your research, but the price tags can stall momentum fast. And with science evolving faster than ever, owning equipment outright isn’t always the smartest move.
That’s where leasing comes in. More specifically: operating leases.
This flexible financing option is helping labs across the country stay competitive without overspending. In fact, equipment leasing reached $1.34 trillion in the U.S. last year—and in hotbeds like Boston, San Diego, and San Francisco, it’s become a go-to strategy for labs that need room to grow.
In this guide, we’ll explain what an operating lease is, how it works under ASC 842, and why it’s often the right choice for labs looking to stay agile, capital-efficient, and focused on the science—not the spend.
What is an Operating Lease?
An operating lease is a type of lease agreement that gives your lab access to essential equipment for a set period of time—without transferring ownership. You make predictable monthly payments to use the asset, while the leasing company (the lessor) retains ownership throughout the lease term.
These leases are typically structured to cover just part of an asset’s useful life. That means you’re not locked into long-term ownership—you can return the equipment, renew the lease, or, in some cases, purchase the asset at its fair market value (FMV) when the lease ends.
Operating leases are especially valuable in industries like life sciences, where equipment becomes outdated quickly and research needs can shift. They provide flexibility without the financial strain of full ownership, which helps labs stay nimble as they grow.
From an accounting perspective, lease payments are generally tax-deductible as operating expenses, and thanks to ASC 842, operating leases are now recorded on your balance sheet as a right-of-use (ROU) asset and lease liability—bringing more visibility to your financials without the obligations of ownership.
When an Operating Lease Makes Sense
An operating lease isn’t just a workaround for labs that can’t afford to buy—it’s a smart financial strategy for staying nimble, protecting your cash flow, and avoiding long-term risks. The real question is: does it align with your lab’s goals?
Here’s when an operating lease tends to make the most sense:
- You’re scaling or pivoting. If your lab is expanding quickly or shifting scientific direction, leasing gives you the flexibility to adjust your equipment strategy without locking in long-term commitments.
- You’re managing limited capital. Leasing minimizes upfront costs and spreads out lease payments, preserving working capital for hiring, R&D, or clinical milestones.
- You’re navigating short-term projects or grants. For labs with time-bound funding or trial-based needs, leasing aligns equipment access with the lease period—and avoids the burden of offloading equipment when the project ends.
- Your tech evolves fast. In fields like genomics, cell therapy, or bioanalytics, equipment becomes outdated quickly. Leasing lets you return or refresh at the end of the lease term, so you’re not stuck with a legacy system.
- You want clean financials. Under ASC 842, an operating lease is recorded as a right-of-use (ROU) asset and a lease liability—but doesn’t carry the same long-term implications as asset ownership. This can help with GAAP compliance, preserving ratios, and presenting a leaner balance sheet.
Operating leases aren’t one-size-fits-all. But for labs focused on flexibility, short-term agility, or capital preservation, they offer a clear edge.
How Operating Leases Work Under ASC 842
Operating leases used to fly under the radar—off the balance sheet, out of sight. But under ASC 842, the accounting standards changed. Now, all leases longer than 12 months—yes, including operating leases—must be reflected on your balance sheet.
Here’s how it works:
What You Record
When your lab signs an operating lease, you record two things:
- Right-of-use (ROU) asset: This represents your right to use the equipment for the lease term.
- Lease liability: This reflects the present value of your future lease payments.
You also record a single lease expense on your income statement, spread evenly over the lease term. That means no separate line items for depreciation or interest—just one predictable monthly cost.
Why It Matters
The goal of ASC 842 is transparency. With leases now on the books:
- Investors and stakeholders get a clearer picture of your lab’s financial commitments.
- Comparing financials across companies becomes easier, especially for labs looking to raise capital.
- Compliance with GAAP is maintained, reducing risk during audits or diligence.
If you’re leasing equipment like an HPLC system for $2,000/month over three years, your balance sheet reflects the present value of those payments—not just a rental expense. That clarity can help your lab make smarter decisions about cash flow, lease terms, and long-term financial strategy.
Residual Value & the Life of the Asset
One of the biggest distinctions between an operating lease and a finance lease is what happens at the end of the lease term—and that ties closely to a concept called residual value.
What Is Residual Value?
Residual value is the estimated market value of a leased asset at the end of its lease period. In an operating lease, the lessor retains ownership of the asset, including its residual value. That means the lessee only pays for the portion of the useful life they actually use—typically a short-term slice of the asset’s economic life.
Example:
Say you lease a refrigerated centrifuge for three years. It has a useful life of 10 years. Your lease payments only cover the time you’re actually using it, while the lessor expects to either lease it again or sell it at fair market value after your lease agreement ends.
Why It Matters
This structure has real financial advantages:
- Lower monthly lease payments: Because you're not paying for the entire value of the asset.
- No transfer of ownership: Unless you choose to exercise a purchase option, you’re not committing to own the asset or manage end-of-life disposal.
- Less risk: The lessor takes on the residual value risk—not you.
For labs dealing with fast-moving tech, this makes operating lease accounting especially appealing. You can cycle through new equipment every few years without getting stuck with outdated systems or absorbing full depreciation costs.
Residual value also plays a role in lease classification. If a lease includes a bargain purchase option, or the present value of the lease payments covers most of the asset value, it may be classified as a finance lease under ASC 842 instead.
Financial & Operational Benefits of Operating Leases
A well-structured operating lease isn’t just about temporary access to equipment—it’s a financial strategy that helps labs stay nimble, manage risk, and stretch their budgets further. Here’s how:
1. Improve Cash Flow & Budgeting
Instead of one large upfront purchase, lease payments are spread evenly over the term of the lease, making it easier to manage cash flow and allocate resources. This predictable lease expense can be integrated into monthly budgeting, freeing up capital for hiring, R&D, or clinical milestones.
2. Avoid Equipment Obsolescence
In life sciences, the pace of innovation makes long-term ownership a liability. With an operating lease, you’re not tied to aging assets. At the end of the lease term, you can return outdated equipment and upgrade to newer systems—without worrying about depreciation or asset value declines.
3. Unlock Tax Benefits
Most lease agreements allow you to deduct the full lease payments as operating expenses, which lowers your taxable income. This can be simpler and more advantageous than the depreciation and interest expense structure tied to owning equipment through loans or capital leases.
4. Stay Off the Hook for Repairs
Many lease contracts include maintenance and service, shifting the responsibility away from your internal team. This minimizes unexpected downtime and improves equipment uptime—especially valuable in labs with lean ops teams.
5. Stay Flexible
Operating leases offer more adaptability than traditional ownership or finance leases. Whether your research scope changes, you open a second site, or your headcount doubles, you’re not locked into equipment that no longer fits.
Operating leases help labs prioritize science without overcommitting financially. Instead of absorbing full ownership of the asset, you’re leveraging access—and giving yourself options.
Operating Lease vs. Finance Lease: What’s the Difference?
While both lease types help labs access equipment without major upfront costs, they’re structured for different goals.
An operating lease is designed for short-term use. The lessee makes regular lease payments to use the asset, but the ownership of the asset remains with the lessor. These leases are ideal when you want to stay flexible, avoid obsolescence, and maintain cash flow without committing long-term.
A finance lease (formerly a capital lease) is closer to a purchase in disguise. It typically spans most of the asset’s useful life, may include a bargain purchase option, and results in ownership transfer to the lessee at the end of the lease term.
The key difference lies in intent: Do you want to use the equipment for a period of time, or do you eventually want to own it?
See our full breakdown of operating leases vs. finance leases.
Why Operating Leases Might Work for Your Lab
For many labs—especially in the life sciences—equipment needs don’t stay static. Experiments evolve. Platforms shift. Teams grow. That’s why operating leases are more than just a financing tactic—they’re a way to stay agile without overextending your resources.
Instead of tying up capital in expensive assets with long useful lives, an operating lease lets you:
- Access critical business equipment without a large down payment
- Align equipment access with short- or mid-term needs
- Keep your balance sheet lighter, even with new gear on hand
- Avoid the long-term risks of depreciation, maintenance, and obsolescence
- Free up cash flow for other priorities—like product development or scaling operations
And as the lessee, you’re not left on your own. Many lease agreements include maintenance and service, helping reduce downtime and ensure compliance.
Whether you’re running a biotech startup, managing an academic core facility, or leading a growing diagnostics company, operating leases give you the tools to grow—without taking on the full financial weight of ownership of the asset.
Final Thoughts: Flexibility Moves Science Forward
Operating leases aren’t just a workaround for tight budgets—they’re a strategic way to equip your lab with the tools you need, when you need them. They help labs stay lean, flexible, and focused on the science, not the sunk costs of equipment ownership.
By spreading out lease payments, reducing upfront financial strain, and enabling upgrades at the end of the lease term, operating leases support better cash flow, smarter budgeting, and more adaptable research environments.
Whether you're outfitting your first wet lab or scaling a second facility, choosing the right type of lease can have a lasting impact on your operations and financials.
At Excedr, we specialize in operating lease agreements built for biotech and life sciences labs—covering everything from centrifuges and freezers to HPLC systems and spectrophotometers. We understand the stakes and the speed at which your work moves.
Let’s help you stay ahead. Get in touch and learn more about leasing options that fit your lab’s goals and growth stage.