Sticky Situation : End Of Term Issues In Equipment Leasing In Canada – Solved!
OVERVIEW – Information on equipment financing in Canada . When business owners/managers choose to finance assets the end of lease issues are as important in leasing as your original goal
Depending on the type of leases that Canadian business owners and financial managers have entered into is critical to have the information and skills to negotiate a successful end of lease strategy. The bottom line is very simple – you are at the end of your Canadian Equipment Lease financing – what now?
The entire process should be viewed as a proactive process with your equipment financing lender. Some Canadian business owners may also choose to use the services of an experienced, credible and successful lease financing intermediary to assist them with the process.
We have heard the expression ‘timing is everything ‘.
So what are the Canadian lessee’s rights and obligations? That’s a simple answer – they are in the written lease contract your firm entered into with the lessor. That wording should be reviewed by you with respect to issues such as –
Can the lessor come to your premises to inspect the equipment?
Does your firm have to provide maintenance records?
What was the return or purchase provisions as documented in the lease transaction you signed?
We would also add that many equipment leases require you, the business owner, to notify the lessor of your intentions under the lease, and in some cases the lessor may also be bound to notify yourself as to final termination issues and procedures. The rights and obligations you have under the lease are neatly compacted into the following points – You can buy, return, renew or extend the lease, or surrender the asset.
By now business owners realize that the lease they entered into three or five years ago must clearly be reviewed again. Companies that do a lot of lease equipment financing are strongly recommended to have follow up and termination policies in place that will allow the lease to be reviewed as it comes to expiration.
Lets talk a bit about the ‘value ‘of the equipment, - This is somewhat of a tricky area and business owners are cautioned to investigate this one thoroughly. We can frankly compare our scenario to selling our homes – we think us as homeowners know what the price is worth, the realtor tells us their opinion, and, guess what, the market will ultimately decide what the home is worth.
It’s not unlike your lease financing transaction, whether that financing was for computers, or plant machinery. Certain assets depreciate and lose value s very fast, some lose a portion of their value, and in a very small set of circumstances some assets hold their value and may in certain instances be worth more than you paid for. (Rare, but it happens!)
In summary, business owners are cautioned to ensure they understand the end of lease options rights and obligations. Follow up to the transaction should not be done at the last minute, and thorough investigation of asset value should be done with proper diligence. It’s only common sense. 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 lease finance challenges.
Stan Prokop - 7 Park Avenue Financial :
http://www.7parkavenuefinancial.com
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 Expertise
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Stan Prokop
