Which Of These Would You Pick When It Comes To Lease Financing In Canada ?

OVERVIEW – Information on solutions offered by commercial leasing companies in Canada . Equipment finance is all about knowing your options and wading through the marketing and business jargon

Equipment finance in Canada is all about ‘ simple ‘ and ‘ easy ‘. Why then do some of the issues around solutions via commercial leasing companies mystify clients? We think we know some of the answers. Let’s dig in.

Although it’s been around almost forever some of the issues are lease financing constantly evolve. Whether its the recent major change in operating lease finance ( good bye forever dear off balance sheet financing friend !) Commercial Leasingor taxation issues our clients can be forgiven for trying to understand which benefits mean the most to them .

Part of the problem also revolves around the marketing and information provided in the highly competitive equipment lease market. Today in Canada solutions abound from captive finance firms attached to mfrs and dealers, independent commercial lease firms that are both Cdn and U.S. owned, as well as Canadian chartered bank solutions offered by their leasing divisions or subsidiaries.

Case in point? Which of these 3 payments would you prefer as a monthly installment on your lease? Let’s use a $100,000.00 transaction as an example.Commercial Leasing
SOLUTION 1 – $ 3133 / MO

SOLUTION 2 – $2640.00 /MO

SOLUTION 3 – $2516 /M0

While most of our clients will say – ‘We will choose the lowest one!” the reality is they are essentially all the same transaction – just structured differently to suit your company’s specific needs around cash flow and ultimate use of the equipment.

Let’s explain.

Solution 1 is a three year lease to own scenario. Payments are fixed and you’re obligated to make 36 equal monthly installments at a specified interest rate. We have used 8% as our example in all calcs.

Solution # 2 is what is known as a bargain purchase options, whereby, mainly to reduce payments during the initial term, the client has the ability at the end of 36 months to refinance the remaining balance, in this case 20%, or to simply pay it out at its option.

Both transaction 1 and 2 have the owner owning the equipment at the end of the lease.

Solution # 3 is our operating lease – coming in at the lowest payment the obligation at the end of the 36 months is to return, purchase, or upgrade or extend the lease according to specific needs of the asset and your firm.

By the way, seasonal or skip payments can also be added into any of the above scenarios, often used to address cash outflow challenges in many companies and industries.

The predictable cash flow in equipment finance is a solid benefit when it comes to cash flow challenges – and more often than not newer or more expensive equipment can be more easily facilitated via the ‘ low monthly payment ‘ lease option that matches benefits to useful equipment life . Very important for assets that help generate revenue!

What we have shown is that you have different options according to needs and the inherent flexibility offered by commercial leasing companies. They help the business owner determine the best decision in that ‘ lease vs. buy’ decision that is required.

Bottom line – While an interest rate and financing cost has to be competitive it’s as important to look at the payment and lease structure flexibility. If you’re interested in ensuring you have all the options on the table from commercial leasing companies in Canada seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
who can ensure your equipment finance needs are met .

Author: Stan Prokop
7 Park Avenue Financial :

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact : Commercial Leasing


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