‘ Some ( Proper ) Assembly Required ‘ On Your Financing For Equipment & TechnologyLease Asset Finance

OVERVIEW – Information on how business owners and financial managers should focus on the right issues when it comes to lease asset finance. Equipment financing is all about what you finance and how when it comes to these ‘ tricks of the trade ‘


Equipment financing in Canada (although my Canadian business owners and financial managers might not realize it) requires some assembly. But don’t worry, it doesnt bring the same challenges as an IKEA put together , it’s simply understanding that when it comes to lease asset finance some knowledge of the basics becomes critical to not wasting mis utilizing your capital . Let’s dig in.

Lease finance is all about asset acquisition – acquiring assets at the right time to run and grow your company. Your ability to understand what type of lease you need, as well as focusing early on re the basics of the agreement can sometimes cost you the thousands of dollars you thought you were saving with this popular tool in Canadian business financing.

The current Canadian scene in asset financing via leases or rentals comes with terms and charges that need to be assessed up front. In the last several years the accounting world has revisited OPERATING LEASES and made some real changes to how this oft under looked finance vehicle works.

We are of course assuming that you as the business owner/manager understand that you do in fact have to choices – either a capital lease , which is a lease to own, or an ‘ operating lease’ which , simply stated, is a rental of sorts.

For years operating leases were known as ‘ off balance sheet ‘. What a great idea – acquire debt and not have to show it! Well the accounting folks have changed all that, so while the key benefits of this type of asset rental remain, your transaction is now visible to all when it comes to the balance sheet and your financials.

Why do lessees then pick operating leases? The reality is that for certain types of assets, i.e. technology, planes, heavy equipment, vehicles, etc you don’t pay the full price of the asset given that at the end of term it returns to your lender/lessor. This means lower monthly payments and flexibility at the end of the lease. And the best part is that at the end of the term you have options, if properly set up front, to return, purchase, extend, or upgrade the asset.

Naturally if you think the asset is going to have value in your business you can ensure the asset remains in your possession, for additional use or resell.

What business owners/managers must do is to focus on key basics at the start. Ensure you diarize the lease for its end of term – lessors have a bad habit of keeping those monthly lease payment requirements coming unless you invoke your end of term options.

While capital ‘ lease to own ‘ options are often 3-7 years in length the most common operating leases tend to be in the 3 yr range unless its a large asset such as an aircraft . All of a sudden your corporate jet acquisition seems manageable?!!

So while your ‘ interest rate’ in a lease is important its key to focus on things such as terms and conditions, type of lease, return/ownership options, and internal management / recording of the lease term . Good negotiation skills up front can save you thousands , also consider the services of a trusted, credible and experienced Canadian business financing advisor who can make equipment financing and lease asset finance a key part of your growth toolkit .

Author: Stan Prokop 7 Park Avenue Financial :

http://www.7parkavenuefinancial.comLease Asset Finance
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 :


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