6.5 Things You Need To Know About Equipment Leasing Options In Canada
OVERVIEW – Information on equipment lease options in Canada. Business leasing success via asset finance solutions requires that you know the following!
Equipment lease options in Canada are abundant these days; but do the business owner/financial manager know how to assess those options and, as importantly focus in on areas that deliver maximum benefit to your particular situation. Let’s dig in.
While not always the case many companies consider their situation unique when it comes to the type of assets they finance, and the terms and structure they demand to maximize business leasing asset finance effectiveness.
A simple yet effective way of managing your lease transactions is to focus on the 6 (more about that .5 later!) Parts of any lease transaction to ensure your individual lease or long term finance strategy melds with what you are trying to achieve.
What are those 6 elements?
Amount you are financing
The amortization or term of the lease
Monthly payment structure
The interest or financing rate implicit in the lease
End of term obligations
In Canada the lease financing industry finances hundreds of billions, probably billions of assets every year. The spectrum couldn’t be broader – it ranges all the way from ‘ micro leasing’ in the amounts as low as 5k to transactions for equipment, machinery, aircraft, in the tens of millions. No dollar amount is unfinanceable if the asset and general credit quality qualify.
Who you finance those assets with often play into the amount you are financing. Your choices are commercial independent lease firms, captive finance companies associated with large mfr’s, and even our Canadian chartered banks currently service asset business leasing via niche subsidiaries or divisions they set up.
Business owners can waster a lot of time ‘barking up the wrong tree’
when it comes to choosing your lease financier. That’s because the business owner /manager doesnt understand that lease company’s arent all things to all people – as isn’t your firm also by the way! So they focus on specific assets, deal sizes, credit quality, and in some cases geography they serve. In certain cases they can even be subsidiaries of U.S. firms doing a lot of business in Canada.
Amortizations in Canada typically run 2-5 years – that term is often driven by the monthly payment your firm requires, as well as tying in to overall asset quality .
Monthly payments have maximum flexibility when it comes to business leasing of assets in Canada. Depending on the type of lease you choose (‘capital lease to own’, or operating ‘lease to use’) almost any payment structure can be utilized to maximize your firms particular cash flow situation.
Interest rates in Canada, when it comes to lease financing revolve around asset quality and credit quality. Typically both come into play when your lease request is being adjudicated. All credit situations can be financed in Canada – it’s a function of structuring the transaction to ensure the lessor has a reasonable expectation of getting paid.
While the majority of Canadian business owners and financial manager’s focus on getting a lease approved and started they often forget what happens at the end of term. Those considerations include returning the asset, upgrading, extending the lease, or finalizing ownership.
Don’t forget the end of the lease obligation!
In some cases misc fees should be considered as part of your overall strategy. They might include appraisal fees on used equipment, down payments, security deposits, and misc admin costs related to lessors registration of the asset.
That’s our 6 point recap. But didn’t we say there were 6.5 considerations? That .5 could be your ace in the hole , as we’re referring to your potential to seek out an speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing business leasing effectiveness for your firms asset acquisition strategy.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of 90 Million $$ of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Off. 905 829 2653
Cell 905 302 4171
7 Park Avenue Financial
Canadian Business Financing