Why Companies Should Consider Leasing Computers and Technology

Tweet

Many companies are not aware of the significant benefits related to acquisition financing in computers and technology segments. The proper term for this type of financing is ' Technology lifecycle management '. Most business owners simply consider the following question: 'Should I buy or lease my firms new computers and software and related products and services?'

Two old adages related to leasing still ring true when it comes to the technological aspect. That is that one should finance something and depreciates, and one should buy something that appreciates in value. Most business owners, and consumers as well know very well that computers depreciate in value. Systems we paid thousands of dollars for years ago are now hundreds of dollars. Walk into any ' big box ' retailer and see the dramatic moves in technology.

Business owners who finance technology demonstrate a higher level of cost effectiveness. The company wants to reap the benefits of the technology over the useful life of the asset, and, importantly, more evenly match the cash outflows with the benefits. Leasing and financing your technology allows you to stay ahead of the technology curve; that is to say you are always using the latest technology as it relates to your firms needs.

Businesses that lease and finance their technology needs are often working better within their capital budgets. Simply speaking they can buy more and buy smarter. Many companies that are larger in size have balance sheet issues and ROA (return on assets) issues that are compelling. They must stay within bank credit covenants and are measure often on their ability to generate income on the total level of assets being deployed in the company.

Lease financing allows those firms to address both of those issues. Companies can choose to employ an ' operating lease ' structure for their technology financing. This is more prevalent in larger firms, but works almost equally as well in small organizations. Operating leases are ' off balance sheet '. The firm adopts the stance of using technology, not owning technology. The lessor/lender owns the equipment, and has a stake in the residual value of the technology. The main benefit for the company is that the debt associated with the technology acquisition is not directly held on the balance sheet. This optimizes debt levels and profitability ratios.

At the end of those operating leases, which are usually 36 months long, the customer has the option of:

1. Returning the equipment
2. Buying the equipment ( not likely though )
3. Negotiating an extension of the financing for continued use of the computers, technology, etc.

Companies that have recently acquired computers and technology can in fact negotiate a' sale leaseback ' on those same assets. This financing strategy brings cash back into the company, as the firm has employed a leasing and financing strategy building on our above noted them - using technology, not owning technology.

In summary, the key benefits of computer and technology lease financing are:

* The company can stay ahead of the technology curve
* Computer leasing and financing has significant balance sheet and income statement benefits
* The firm has flexibility with respect to buying new product, returning existing technology, and generating cash flow for purchases already made

Many of the benefits we have discussed relate to leasing in general. However, technology and lease financing are very perfectly suited to the business financing strategy of leasing.

Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :


http://www.7parkavenuefinancial.com



7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


'

Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop



















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698

Article Source: http://EzineArticles.com/3422622