Equipment Financing - Capital Leasing Options That Make Sense

Equipment financing decisions are among the easiest decisions your firm can make when it comes to business financing – it only takes some simply research to be a well informed and successful lessee in the Canadian equipment financing marketplace.

The age old questions for Canadian business owners and financial managers in Canada has always been the same – should I buy the equipment or should I lease it via capital leasing options that make sense for my firm.

We use the expression capital leasing option which you should know references the fact that you probably intent to own the equipment at the end of the term of lease after payments have been made.

The reality is though that equipment leases come in two flavours – a capital or finance lease where you intend to own the equipment, or, the alternative, an operating lease whereby you use the asset for the term of the lease. At the end of this type of lease you have three options, you can return the equipment, upgrade or extend the transaction, or purchase the asset for an agreed upon ‘fair market value ‘from your lessor. Operating leases tend to be very attractive to your firm if your overwhelming desire is to ‘use ‘the asset, not to ‘own ‘the asset.

Equipment leases and equipment financing in general is clearly the alternative to bank financing or taking out a term loan for the equipment. Most businesses in Canada time and time again tend to utilize equipment financing in many cases simply because it is easier to get approved as well as you tend to be in a position to close the financing in a much shorter time frame – i.e. no bank negotiations, etc .

Because of the diversity and breadth of the Canadian equipment leasing industry the reality is that financing is available for all types of equipment and all types of ‘ credit quality ‘ – credit quality of course being the perceived overall financial condition of your firm .

We encourage clients to seek the services of a trusted, credible, and experience business leasing and financing advisor who can steer them easily thought the diverse group of lessors who have different appetites for overall credit quality, as well as the asset type that you are seeking to financing .

We should also mention that almost any asset in Canada can be financed, from high end costly industrial equipment leasing all the way to something more esoteric as computer software. The fundamental precept of lease equipment financing is that the asset itself is the main collateral for the loan. Naturally you should be in a position to properly address and present a case that you will be able to make the payment on the lease via the production nature of the asset for your firm. The two concepts that a lessor looks at is primarily cash flow and your overall debt position Vis Vis equity.

As your firms builds equity in the asset as you repay your lease this allows you at some future time to leverage this fixed asset based and utilize these assets for refinancing for more working capital and cash flow, etc. This basic concept is known as sale leaseback financing.

Entire books are written on the advantages of leasing – they can be summarized as follows:

- Your ability to acquire the asset you need while removing the key obstacle of ‘ cost ‘

- Term – You want to be in a position to match the term of the lease with the expected useful life of your asset acquisition
- Tax advantages – talk to your accountant, as in many cases it is more advantageous to lease rather than purchase or take out a loan
- Payment flexibility – payments can very often be matched to the seasonality and cash flows of your business

The current business environment has made it very difficult for firms such as yours to obtain the proper business financing, whether that be working capital, operating facilities, or, in our case here, asset acquisition.

Utilize equipment financing as a key part of your business financing toolkit!

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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_capital_leasing_options.html