Equipment Financing Canada – One Big Mistake Not to Make

Equipment Financing – Canada has embraced this type of business financing for decades. Most Canadian business owners and financial managers know they can obtain financing for equipment, but they are often unaware of some of the hidden benefits, and, yes, pitfalls, of equipment financing. Let’s explore a couple of those key issues that you need to know about.

Myth ! - Only ‘new’ equipment can be financed.

Nothing can be more farther from the truth. Lease financing is readily available for all types of equipment in Canada, including used and refurbished equipment. This equipment typically is bought at auctions, as well as via the internet, or in many cases from dealerships that have taken a trade in or have a machine that has come in off- lease.

The main benefit of used equipment financing typically is the price. Lets look at an example – lets say you are buying some production equipment and the price for new equipment is 300,000.00$ - Typically this type of equipment if lease financed over 4-5 years. If you were to acquire the asset as used, and lets say you got it for $ 225,000.00 (certainly not unrealistic), then you are saving that 75,000.00 – that’s obvious to anyone of course. But remember that 75,000.00$, if purchased new, is a part of a 4-5 year financing so the ability to cut 75k in long term financing out of your cash flow is a very large benefit .

We would point out that in some cases, because the equipment is used, it might need to have an appraisal or a valuation attached to the financing – this would typically be obtained from a qualified third party appraiser. Typically, as in all financing costs, the borrower, or in our case, the lessee, (that’s you) pays for the appraisal. So the common sense question simply becomes – if your equipment was warrantyed, guaranteed, and you felt it had long term value, would you in fact invest 1k in an appraisal to save 75k++ in financing costs . We think our clients would!

Does the type of equipment alter the pricing and structure of your equipment lease – in some cases it might, but typically not drastically. The lessor might in some cases ask for a down payment, or a larger down payment, and also might, on occasion, lower the term of the lease ( for example – 3 years , not 4 years , etc ) but overall lease financing for used equipment is still a great value . In many cases even computers are often re financed after they are returned to the vendor or reseller.

Clients often ask if there are certain types of used equipment that can’t be financed. The reality is that pretty well everything can be considered for financing. Normal credit underwriting is done, focused mostly on your ability to repay the lease from cash flows generated from your company and the asset. All types of equipment should be considered, especially when you and your team have confidence in your ability to acquire, price, install and maintain the asset.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/equipment_financing_canada_used_equipment_finance.html