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Asset Financing Via The Equipment Lease Finance Solution - Almost As Exciting As A Solar Eclipse ?
Information on why equipment leasing continues to be a solid asset acquisition strategy in Canada. Tips of the various benefits of lease financing and its various forms of flexibility
We can’t think of any business asset that can’t be financed via leasing. It goes without saying that your firm has to demonstrate the ability to pay for that asset over the period of the lease. In many case acquisition of assets through lease financing is part of a long term strategy for Canadian business owners and financial managers who wish to ensure they have productive, up to date assets that are being acquired at the lowest cost method, including flexibility that often comes with lease financing.
What is that flexibility?
As bank lines and term loan facilities in Canada tightened up a lease financing strategy become ‘job one ‘for many Canadian firms who wished to continue to remain competitive within their industry. As analysts and bankers focused on a company’s ability to generate cash and working capital leasing became a tool that allowed them to do that. Cash flow is probably better used to allow your firm to build up receivables, inventories and generate profits from same.
When clients share their stores about equipment financing one of the key points they continue to make is that lease financing is simply easier to arrange and get approved. That is true for a variety of reasons, but simply speaking it’s that lease firms are in one business only, they know their collateral, and they are focused on optimizing rates, terms and structures that work for themselves and the customer. A large amount of emphasis is always placed on collateral, while a similar application at your bank or term lender might focus more on overall balance sheet and income statement health.
That is simply why in many cases Canadian business owners and financial managers should assume that a decline from a bank or term lender will mean the same from an equipment financing firm. In some , perhaps most cases leasing actual overall interest rate will be higher than a bank or term lender, but cash outlay, credit covenant restrictions, and flexibility structure make that higher rate generally worth it !
If you speak to your account or lease advisor you will also find there are a number of balance sheet, income statement and tax advantages to leasing equipment. We find that each firm wants to maximize those benefits but some are more important than others. More sophisticated and larger firms tend to gravitate toward operating leases – in this case transaction tend to be larger, the debt on the transaction is not on the balance sheet, and the company has the right to return, upgrade, or purchase for fair market value the equipment at end of term . That is true flexibility!
Your firm should always consider a lease financing strategy when your asset acquisitions involve technology. That technology is changing and your ability to buy the best, newest, as and when you need it is why lease financing is such a driver in technology asset acquisitions. Those assets tend to be computers, medical equipment, etc.
Down payments are often required in leasing, but they tend to be minimal – 10% is a common number, and that certainly beats an outlay of valuable cash and working capital of 100!
The main challenge and focus of your firm should be to ensure you, or your trusted lease financing advisor position your application properly. That involves a solid identification of who your firm is, what asset you wish tot acquire, the structure desired, and most importantly, the ability to show that the weight of evidences suggests you can pay for the asset over the desired term. Solid financial statement presentation is key. Working with credible lease advisors and lease firms is also key – fostering a long term relationship in that area will reap many benefits over the years.
In summary, equipment leasing in Canada provides a multitude of solutions for asset acquisition. It’s a direct way of acquisition without utilizing your bank and term loan credit lines. Flexibility is key in leasing, and you should focus on which benefits and structures work best for your firm as every company and industry has different business models and challenges.
7 Park Avenue Financial :
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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 100 Million $ of financing for Canadian corporations .
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
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