Equipment Leasing – Canada: As a Canadian business owner or financial manager you want options for financing new and used equipment. (Yes, used equipment can be lease financed also!)
Clients always ask if a certain type of equipment can be financed – the reality is that pretty well every business asset can be financed, even if the transaction requires special structure or pricing.
Although we don’t necessarily agree with our clients view that rates and pricing are the most important aspect of equipment leasing the reality is of course that ultimately your overall combination of rate, structure, monthly payment, and type of lease, etc must be competitive.
‘What’s my rate?’ is not our favorite question, but we usually respond that as a business financing client in Canada you actually get to pick your own rate!
Customers naturally think we are joking, but as we explain, the reality of equipment financing in Canada is that your overall credit quality and the asset you are financing determines your rate. For most transactions in Canada whether you like it or not your lease pricing is determined by something called historical cash flow. That has its advantages and certainly disadvantages.
The leasing company looks at your historical cash flow and then makes a determination around your ability to make future payments.
Naturally if you had a challenging year (who didn’t have a challenging year in Canada in the 2008-2009) timeframe that presents a potential problem. However that issue can be relatively easily handled by something we call ‘structuring ‘, or simply the ability of putting together a lease with particular emphasis on flexibility in actual per cent age interest rate, the term of the lease, the options you have at the end of the lease, and any special situations involving payment alternatives – for example seasonality in your business, etc.
If we had to make on key point on obtaining the best structure in a lease its simply asking customers to remember that the overall structure of the lease has to make sense to you as the borrower and of course the lender from a viewpoint of overall credit quality and risk .
Many businesses are not aware that a significant number of soft costs can be financed in your equipment lease. These could include training; install fees, maintenance contracts, and consulting on some occasions. That’s a true working capital and cash flow saving.
Many firms tout ‘100% financing ‘as one of the main benefits of lease financing – the reality is that in most situations today there is some sort of down payment or security deposit. The alternative to a lease is of course a loan, and in that case you are more likely to get 100% financing, but you certainly won’t have the advantages of a true lease financing option.
Lease financing in Canada is available to all sizes of firms, including start ups. The quick summary of major benefits is simply as follows:
- Financing equipment conserves cash flow and working capital – No major cash outlay is required
- The lease financing approval process takes considerable less longer than other traditional financing applications
- There are a number of tax and accounting advantages to lease financing in Canada
So what’s our bottom line summary on equipment leasing – Canada. It simply that you should view it as a major option in acquiring any business asset. Speak to a trusted, credible and experienced advisor who can show you how a solid pricing and structuring can assist you in acquiring any asset you require to generate sales and profit growth.
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: