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Leasing Equipment and Lease Finance in Canada: The Key to Unlocking Growth and Profitability

INTRODUCTION

In the world of equipment lease finance and asset loan solutions in Canada, businesses often face a critical question: Should they pay with cash or opt for lease finance?

Leasing companies offer a compelling option to finance asset acquisitions, and thousands of firms of all sizes in Canada continue to embrace this method to fuel their growth, boost profits, and stay competitive. In this article, we will explore the reasons behind the popularity of equipment leasing, the different types of leases available, and the advantages that lease finance offers Canadian businesses.

THE CHALLENGES OF ACQUIRING EQUIPMENT AND TECHNOLOGY FOR YOUR BUSINESS

Acquiring new equipment comes with a significant cost, which can strain a company's cash flow and working capital needs. Regardless of the firm's size, the capital budgets required for purchasing equipment can drain the resources that businesses would instead use to fund daily operations and growth. This challenge has led many companies to consider alternative financing options, and equipment leasing is a viable solution.

BENEFITS OF LEASING EQUIPMENT IN CANADA

Improved Cash Flow Conservation and Working Capital Management: When a business opts for equipment leasing, the leasing company pays the equipment supplier directly. This eliminates the need for a significant upfront cash outlay, preserving the company's cash flow and working capital for other critical expenses and investments.
Simplified Purchasing Process: Leasing streamlines the equipment acquisition process by allowing the leasing company to handle payments directly to the supplier. This reduces administrative burdens for the business and ensures a smooth and efficient transaction.
Effortless Budgeting: Lease payments are fixed and predictable, making it easier for companies to budget their finances accurately. This stability helps businesses plan their expenses more effectively, avoiding unforeseen financial challenges.
Access to Larger and More Expensive Assets: Lease financing enables businesses to consider acquiring higher-cost assets beyond their immediate purchasing capabilities. This includes advanced technology and software that can significantly enhance the company's operations and competitiveness.
Flexibility for Business Growth: Leasing allows companies to upgrade to newer equipment or technology as needed, ensuring they stay up-to-date with industry advancements. This adaptability helps businesses maintain their competitive edge and respond to changing market demands.
Preservation of Credit Lines: Leasing finance allows businesses to conserve their credit lines. This is especially beneficial for small and medium-sized enterprises (SMEs) that may need credit facilities for other critical business needs.
Tax Benefits: Lease payments may be treated as operating expenses, potentially providing businesses with tax advantages. Consulting with a tax professional can help companies fully understand the tax implications of equipment leasing.
Reduced Risk of Equipment Obsolescence: In rapidly evolving industries, technology and equipment can quickly become outdated. Leasing allows businesses to avoid owning obsolete equipment, as they can upgrade or return the leased assets at the end of the term.
Enhanced Asset Management: Lease financing often includes options for bundling services such as insurance, maintenance, and training into the lease agreement. This comprehensive package simplifies asset management and maintenance responsibilities.
Speed and Convenience: The leasing process is generally faster and more straightforward than securing traditional financing options. Quick credit approvals and minimal documentation requirements enable businesses to acquire the necessary equipment promptly.

UNDERSTANDING FINANCE LEASES/CAPITAL LEASES AND OPERATING LEASES

In Canada, there are two primary types of equipment leases: operating lease and finance leases (also known as capital leases).

Operating leases, often called fair market value leases, offer lessees significant flexibility at the end of the lease term, allowing them to choose whether to buy, upgrade, or extend the lease. On the other hand, finance leases are an attractive option for those who wish to own the asset at the end of the term. The choice between the two types of leases in equipment lease financing in Canada depends on the business owner's specific needs and preferences.

UNLOCKING BUSINESS CAPITAL FOR ASSET ACQUISITIONS

Different industries have varying levels of capital intensity, and businesses with high capital needs may constantly struggle to raise additional equity. Equipment leases and lease finance provide a solution by enabling companies to conserve cash and equity. In a competitive environment, staying up to date with equipment, software, and other assets becomes crucial, and leasing offers an effective way to achieve this without exhausting financial resources.

LEASE FINANCING IS VERSATILE - HERE'S WHY!

Lease financing extends beyond traditional equipment purchases. Including the absence of a small or no down payment, this business financing solution also covers miscellaneous costs, such as insurance, maintenance, services, and training, which can be easily bundled into the lease transaction. This flexibility makes lease financing appealing for businesses seeking a comprehensive solution to their asset acquisition challenges.

LEASE FINANCE VERSUS OTHER OPTIONS

Canadian business owners and financial managers have several options when acquiring equipment. They can pay with cash, draw down on the company's line of credit, explore equipment loan solutions from Canadian chartered banks, or lease the equipment. While traditional financing options may have their merits, lease financing for the business owner often emerges as the most favourable choice due to its speed, simplicity, and competitive interest rates on monthly payments structured to cash flow.

KEY ADVANTAGES OF LEASE FINANCE

Interest rates in the leasing industry in Canada are currently at all-time lows, making lease capital accessible to businesses with varying credit qualities for lease equipment needs.

Lease rates may vary based on credit quality, transaction size, and asset quality. Additionally, the ease of application and simple documentation in the leasing industry ensures quick funding, with some transactions even being processed without financial statements. This speed and efficiency in lease finance approval provide a significant advantage over traditional financing methods.

Leased equipment that is now owned by the company can also be refinanced.

7 PARK AVENUE FINANCIAL LEASE SOLUTIONS

For every small business in Canada facing asset acquisition challenges, equipment financing can play a crucial role in unlocking growth and success. Companies can benefit from partnering with a reliable, experienced lease financing advisor like 7 Park Avenue Financial. We can offer customized financing options that align with the unique needs of each business, providing a valuable proposition that fosters growth and profitability.

CONCLUSION

In conclusion, leasing equipment and utilizing lease finance in Canada present a compelling approach to address the challenges of equipment acquisition and capital management.

By opting for lease financing, businesses can conserve cash, access the latest technology, and stay competitive in their respective industries. The versatility, simplicity, and efficiency of equipment leasing agreements make it an attractive choice for businesses of all sizes seeking sustainable growth and long-term success.

If your business needs equipment financing, consider the benefits of lease finance and explore the expertise of 7 Park Avenue Financial, a trusted, reputable lease financing advisor and business funding provider, helping your company make the most informed decision on business financing needs.

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

Q: What is equipment leasing, and how does it differ from traditional equipment purchasing? Equipment leasing from lease providers involves renting/using equipment for a specific period, while traditional purchasing entails buying the equipment outright. Leasing offers more flexibility and cost-saving benefits.
Q: Why do Canadian businesses prefer equipment leasing over other financing options? Leasing conserves cash flow, enhances working capital management when companies consider an equipment purchase and allow for easier budgeting. It also provides access to the latest technology and helps businesses stay competitive.
Q: What are the two kinds of equipment leases available in Canada? A: The two types are operating and finance (capital leases). Operating leases offer flexibility at the end of the term, while finance leases provide an option to own the asset after the final lease payment is made.
Q: How does lease financing speed up the acquisition process compared to traditional bank loans? Lease financing via a lease broker offers quicker approval times and simplified documentation, and, in some cases, it does not require financial statements, making it a faster and more efficient option.
Q: How can a lease financing advisor assist my business in making equipment acquisition decisions? A lease financing advisor can offer tailored financing options for purchasing the equipment a company requires based on the business's needs, credit quality, and asset requirements, ensuring the most suitable solution for your growth and profitability.

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Tuesday, August 1, 2023

Equipment Leasing and Lease Finance Loans in Canada