How’s Your Business Financing ‘’Lease or Buy ‘Expertise? Assessing Your Lease Financing Options

Analyzing Business Asset Acquisition Alternatives


OVERVIEW – Information on the lease or buy decision that owners face when they employ a lease finance option in their overall business financing strategy



Did you realize that when it comes to Canadian business financing the 'lease or buy ' decision is actually an ' investment ' decision? Let's look at some key aspects of leasing finance that will help you analyze the alternative you might not know you have!

While various business assets can be leased, i.e. land, office, etc our focus today is on equipment and assets. The key advantage of leasing these assets is that it allows you to free up scarce capital that you would otherwise spend in other aspects of your company... i.e. daily operations!

The challenge though, for the Canadian business owner and financial manager is knowing how long you will hold the asset, and if it will have any value at the end of your usage and lease term. And because it's a lease, and not a purchase you can’t make unilateral decisions to sell the asset or make a dramatic change to it. Your lessor of course has a buy in into that decision, and the reality is they borrowed the money also and have locked in a certain yield they hope to achieve on all your payments.

We love talking to clients about the ' lease vs. buy' decision as some are keenly aware of the key drivers in that decision, and others... are not!

So what are some of those key drivers? They include the actual cost of the asset, taxes, accounting treatments re book value, as well as making an intelligent decision around what the leasing company calls the ' useful economic life ' of the asset.

Cash flow is critical in the business owner’s final decision around the asset acquisition, but at the same time you want to ensure that you also consider the profit generating aspect of the asset.

Many business owners don't fully understand their ' cost of capital ' , and other factors to consider are areas such as debt vs. equity , given that debt is pretty well always cheaper than reducing ownership control via equity dilution . And if your company has a reasonable amount of equity and a clean balance sheet you can achieve very attractive lease costs in today’s business financing environment.

Not all the lease / buy decisions you are faced with have to do with ‘the numbers ‘. A good example – purchasing or leasing new technologies for your employees give your company both a solid reputation and are somewhat of a morale booster. In certain cases because of government legislation you may even be forced to lease or purchase assets you might not necessarily have wanted to... or needed. That’s our governments for you... here to help ..!?!
Clearly good it’s always good to focus more so on revenue producing assets, and in particular ones that produce sales and profits. On occasion though the business owner finds himself or herself faced with the proverbial ‘guesstimate ‘when it comes to business asset acquisition.

So can we summarize some of the critical factors in the ‘leasing or purchase ‘decision? They might include:

Revenue and cost issues

Tax/accounting/depreciation/useful life issues

Budget constraints

Intangible issues re customer and employee perceptions

If you’re not totally comfortable with acquiring assets under a lease / loan or purchase strategy seek out and speak to a trusted, credible and experienced Canadian business financing advisor today.

7 PARK AVENUE FINANCIAL
CANADIAN LEASE FINANCE EXPERTISE



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 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business_financing_lease_or_buy_leasing_finance.html

Capital Equipment Finance Choices In Canada. Should You Lease Or Buy ?

Your ‘ Taxing Questions ‘ Answered On Equipment Leasing In Canada


Information on capital equipment finance solutions in Canada . The lease or buy questions when it comes to business asset finance should be addressed in this manner.




Capital equipment finance choices in Canada. One of the basic issues often simply is ' Should the business owner lease or buy ' business assets, and if they choose ' finance ' why is equipment leasing a suitable and recommended options?

There are really 3 key concepts when it comes to deciding whether leasing or outright purchase is the way to go when it comes to financing your firms fixed assets. The 3 areas you should focus on are:

Managerial Issues

Accounting and Financial Issues

Financing and Tax Issues



When you have a handle on those three you’re poised for business asset acquisition success!


The financing and tax issues are quite often perceived as the most important buy the Canadian business owner and financial manager. They are concerned with things like the financing rate within the lease (we believe that is often the least important in most cases as your credit quality will always give you a ' competitive ' rate), and the way the lease is shown on their books for tax and accounting reasons.

You should always know, and consider what type of lease you actually need, or want to enter into. In Canada it comes down to operating versus capital leases, and not all business owners are aware of the nuances of each.

When we talk to clients the simple way we describe an operating lease is simply to suggest that the client view this finance as simply an asset that is on rent. The rental payments are of course expensed , and in the old days a significant amount of emphasis was placed on your firms ability to ' hide ' the transaction off your balance sheet, thereby improving a lot of the equity and operating rations that lenders and investors look at .

Unfortunately, with a lot of the new accounting rules that particular one benefit has diminished, but the reality is that operating leases for assets such as technology and heavy equipment are as popular as ever. Payment tend to be lower ,and the flexibility of having 3 choices at the end of the term of the lease is perceived as positive by companies that are capital intensive when it comes to both technology or heavy equipment, our two chosen examples .

Oh, and by the way, those 3 choices..? They are your ability to purchase the asset at the end of the lease, return it, or extend /upgrade the asset. Talk about financing flexibility!

Your firm might choose a capital lease when it comes to your firms desire to own, rather than ' rent ' the asset. These leases are non cancelable, might have a higher payment attached to it because of your ownership right, and this type of lease has to satisfy several accounting criteria around ownership, useful life, and financing charges.

The managerial issues around capital equipment finance tend to revolve around flexibility of financing, technology obsolescence protection, and your ability to access other sources of credit other than ' the bank '.

Not every finance solution in Canada is perfect for all situations. Some Canadian businesses associate leasing with a higher cost, and they don't necessarily want another firm or institution to benefit from the residual value of the asset in question. They want that profit for themselves!

We always encourage clients to talk to their tax person or accountant when it comes to tax avoidance via leasing ( that’s avoidance , not evasion by the way !) , accounting treatment, expensing payments, etc.

If you have properly addressed the ' lease or buy ' decision in Canadian asset acquisition consider speaking to a trusted, credible and experienced Canadian business financing advisor who can assist your with the proper financing of your transaction,

7 PARK AVENUE FINANCIAL
CANADIAN CAPITAL EQUIPMENT FINANCE EXPERTISE



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 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/capital_equipment_finance_lease_or_buy.html