OVERVIEW – Information on why leasing companies are almost always a solid bet when it comes to asset financing/refinancing . Recognizing the benefits of equipment loans and leases makes your business a winner
Equipment loans and leases in Canada, as offered by leasing companies and other commercial finance firms are at an all time high in popularity.
When the business owner/ financial manger understands why this is the case he or she can take advantage of benefits and advantages that are reserved for all. Its one time when following the crowd is a must! Let’s dig in.
The acquisition of assets in business always comes down to several key decision points – the use and benefits of the asset and the cost and cash flow outflow ramifications. More and more the owner / manager is focusing on using an asset, not necessarily owning it. With all respect to those ‘ pride of ownership ‘ folks preserving cash flow is almost always king.
Equipment financing sometimes by necessity can get a little complex – more often than not it’s a simple process, but it’s critical to understand that some of the factors you must also consider in financing equipment include:
Effects on your balance sheet / Debt load
Impact on credit line facilities
It’s interesting to note that almost all the Canadian chartered banks today offer specialized leasing services via separate entities within the bank. Typically these transactions are reserved for bank clients, and those that have solid credit. Deal size is typically larger here also.
The balance of industry is covered off by independent Canadian commercial finance companies. These firms typically have set credit profiles they are looking for, as well as deal size and asset mix.
In Canada almost any asset can be financed. That includes technological needs also – such as computers, software, telecom equipment, etc
While the majority of the industry is focused on what is known as the ‘ Capital lease ‘, aka ‘ lease to own ‘ its important to know that another choice exists – that’s the ‘ Operating lease ‘ or ‘ lease to use ‘ so to speak.
Factors that business owners must take into account when considering leasing or the type of lease they will choose include –
Estimated life of the asset
The desire to own or return the asset
Leasing structure relative to rate, term,
Cash flow impact
Computer leases are probably the best way to describe the benefits of operating leases. That’s because the technology changes so quickly. Owners wish to often upgrade, replace or refresh, and assets can be efficiently returned with no obligation to buy.
Assets you own can also be leased by the way! That’s essentially called a sale leaseback, and allows you to keep assets in the business and take advantage of the equity in those assets. The process is relatively simple and includes ensuring the asset is lien free, has value (typically via an appraisal) and ensuring a proper lease or loan structure is in place. The lease can be in this case substituted for a ‘ bridge loan’ of sorts.
Have we forgotten anything? Oh yes. If you business offers a product that can be leased you can benefit from offering a customer financing program. By partnering with the right firm you can offer all the benefits of equipment loans and leases to your clients. Key benefits include:
Immediate cash flow for the vendor
Removal of budget and price constraints in your products
Creating a strategic advantage via your client’s perception you offer a one stop solution
So, if 80% of Canadian business is ‘ HOOKED ‘ on solutions offered by leasing companies the choice seems pretty clear. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your business financing needs.
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 :
7 PARK AVENUE FINANCIAL = CANADIAN EQUIPMENT FINANCING AN LEASING EXPERTISE
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