Getting It Wrong Is Not An Option When It Comes To Asset Lease Finance
OVERVIEW – Information on what key concepts business owners and financial managers must address when constructing the right equipment lease with their chosen leasing company solution provider
Equipment lease solutions aid in acquiring assets. Simple as that. It’s a solution that’s used by a majority of businesses in Canada and the U.S. alike. But can you ‘ get it wrong ‘ when it comes to a leasing company choice. In some cases any mistake in financing an asset properly costs your firm time and money. Let’s dig in.
Whether you’re a public company, a government entity, or even a start up it’s still important to give serious attention to how you’re leasing and asset, who you are dealing with, and the rights and obligations you have in leasing equipt. in Canada.
Leasing is all about cash flow conservation, so some solid cash flow planning around projected monthly payments relative to the useful life of the asset.
Naturally no form of Canadian business financing is ‘ all inclusive ‘ and works all the time – so yes, alternative options do exist. They include loans or rentals, although rentals are in effect a form of the ‘ operating lease ‘ solution.
Picking the right term is critical as it relates to our cash flow mention, as well as being able to accurately determine the life of the asset. While longer term/amortizations are available typical lease terms are 2-5 years in Canada. Certain heavy equipment/aircraft/production equipment etc lends itself to much longer terms potentially.
It seems our clients always only want to talk about ‘ rate’ ‘ interest rate’ considerations on any transaction. That’s all well and fine but the actual terms of the lease as well as type and structure are considered much more important by experienced lessors. At the end of the day your overall business credit quality (or lack thereof) will take care of the interest rate question, if only for the reason that the industry itself is very competitive these days!
It’s that competitiveness that will allow you potentially negotiate critical customer concerns such as down payments that might be required, the dreaded ‘ personal guarantee’, or end of term options such as upgrading, returning, extending the lease .
Many of our clients we initially talk to don’t fully understand that ‘ capital lease’ (i.e. lease to own) solutions are known as ‘ hell or high water ‘ contract, requiring you to make all the payments under the lease – i.e. no early terminations, etc.
Who in fact offers lease finance solutions in Canada. You’d be surprised at the number of players; they include some of our Canadian chartered banks, independent commercial lease firms, captive organizations within certain large manufacturers, and niche players. In some cases your lessor might be 100% Canadian, in other time it might well be a subsidiary or division of a U.S. organization. (Not that there’s anything wrong with that!)
So is there any one way to guarantee you are aware of and selected the right lease structure and lessor? One possible solution is to seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can ensure ‘ getting it wrong ‘ is not the option.
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 LEASE FINANCING EXPERTISE
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