Hard To Believe – Lease Finance Tips for Operational Financing of Assets – A Financial Win!

Isn't it all really about growing your business? That is why lease finance, utilized properly becomes a solid competitive strategy for your Canadian business financing needs.

Whether it’s operating leases (some owners call them ' operational ‘) or lease to own capital leases your ability to match the financial solution to your asset acquisition needs can create a viable option to complete your financial strategy.

But solid insights into how Canadian equipment and lease finance works sure can help, as the market is fragmented and has numerous players , all promising you different things, and all trying to fit you into their ' box ' - which you might find won't fit once you're inside!

A frequent term utilized in lease financing is ' lifecycle '. Let's look at that in a number of ways. In its most common use it refers to two things - matching the financing you utilize to your useful asset life, and at the same time choosing the type of lease that works best for that particular asset, and your balance sheet.

Utilizing the right type of lease will end us satisfying owners of the firm, and its creditors, relative to new debt being acquired. We talked about those ' operational ' leases, more commonly called off balance sheet operating leases. They have the ability to eliminate additional debt on the balance sheet ( trust us its still there, just not on the balance sheet !) as well as keep your ratios intact if you're operating within bank guidelines around debt to equity, cash flow, etc.

Those operating leases tend to work really well when you are in a technological environment, a good example being computing and telecom.

Quick example - let's say you are doing a major computer upgrade and total cost of all hardware and software is $1,000,000.00. Getting back to our lifecycle comment you typically would finance this over 3 years (given the fast changes in technology). A capital lease at today’s competitive rates would typically generate a monthly payment obligation of approx $30,000.00 - and at the end of the lease term your firm is the ‘proud owner ' of 1 Million dollars of computer hardware and related items. We'll come back to the word 'proud '.

However, that same transaction, utilizing a lease financing operating (operational) strategy would yield a payment obligation of only $24,000.00.
And oh yes, would you really feel that 'proud' about owning a 3 year old computer system - we think not, that’s why that same operating lease can provide you with lifecycle management flexibility, allowing you to return, extend, upgrade, or purchase if you choose . It’s a right though, not an obligation, and that’s important.

All clients, whether we like it or not, focus on rates. Of course they are important, but we caution you that you can have the best rate and monthly payment in town and pay dearly for being in the wrong type of lease financing strategy with the wrong options available to your firm.

And do you want to know the true reality of ' rates ‘. It’s that you get to pick you own. Surprised? You shouldn’t be, because in effect your own credit quality actually drives your final rate - as it’s a competitive world out there. We can usually tell within minutes what a competitive rate band you might find yourself if, if you'll share some key financial disclosure on your firm.

Finally, industry knowledge. Is there a way you can navigate Canadian equipment financing waters successfully, in a manner that makes sense from a time and cost perspective. There are hundreds of lease finance firms, all have different criteria, some do large complex deals, some only small ticket deals and all have varying levels of financial disclosure required by your firm.

The solution? Seek a trusted, credible and experienced Canadian business financing advisor who is independent and focuses on financing the type of transaction you need at rates, terms, and structures that you deserve. Expertise and service that will be guaranteed.




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 .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/lease_finance_financial_financing_operational.html

Interested In Understanding Business Working Capital in Canada ? Cash Flow For Operational Needs

Interested in finding out why business working capital and cash flow challenges for operational needs are a challenge for small and medium sized businesses in Canada? We are pretty sure you are even more interested in some solutions to that challenge!

A March 2011 report out of the U.S. noted among other things that small and medium sized firms are still having huge challenges in raising the working capital they need - even though in many sectors business is back to ' booming ' again . As a Canadian business owner or financial manager you would like some solutions to get that cash flow booming again, we're sure.

For firms that are mature in age, have good assets and strong operational cash flow those challenges are limited. However, if your company is on the opposite side of that spectrum you're living in a ' business hell ' if we can use that term - at least if it isn’t hell its purgatory!

How can you identify the best, what we can call ' straight forward ' options for working capital and business cash flow solutions? We think the answer is simply understanding and getting a handle around the traditional ( or conventional ) Canadian business financing techniques , but, even more importantly, understanding newer solutions that are becoming more mainstream in acceptance everyday . Without the resources of an experienced business financing advisor you might not even have heard of some of these solutions, let alone having considered implementing them.

We're the first to agree that Canadian banks are lending again, rates are close to all time lows, and credit reins and collateral and covenants have slowly loosened. But again, small and medium sized businesses aren’t feeling it. Another recent March2011 survey, albeit U.S. based said most business owners still experience temporary or severe cash flow issues, forcing them to delay payments to suppliers, and delay spending on new assets for business growth.

In order to implement better, or newer working capital and cash flow business operational strategies your firm must understand how you are managing your finances now, what assets are available to monetize, and, often forgotten, you must have a handle of what future cash flow needs will be.

As we noted, traditional bank financing is alive and well in Canada. For those that can't leverage the amount of operational credit that they require a better understanding of ' new ' solutions is required. And we know you've been waiting for what those new solutions are!

More recent and increasing widely accepted methods of generating working capital include the following - asset based lending , working capital facilities that margin a/r and inventory as a combo , confidential invoice discounting , securitization, cash flow sub debt loans, purchase order and contract financing, as well as bridge loans on already owned equipment . Our favorite - asset based lending... but more about that one on another day.

Any of the above solutions will allow you get your cash flow and working capital under control. Speak to a trusted, credible an experienced Canadian business financing advisor. Reclaim your business cash and operational financing!

-


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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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