Why not discover how 7 Park Avenue can help your Kitchener Ontario business obtain the right financing for the equipment you need? We want to help your business grow. Give us a call today!
Canadian Sale Leaseback Financing – The Basics - By Stan Prokop - 7 Park Avenue Financial
Sale leaseback financing in Canada is a very robust part of the Canadian Equipment and Lease Financing industry. Many business owners and financial managers in Canadian firms may not yet be aware of the wide popularity and increasing use of this type of alternative financing facility. For various economic and financial reporting considerations this finance strategy continues to be scrutinized as a financial option for Canadian business.
The overall sale leaseback strategy has been around for a very long time, and, as noted, gains in popularity. The primary reasons for its increasing usage are the ability of business owners to enhance their profits to a certain degree, as well as to generate additional cash flow for the business. The latter would appear to be the most common current factor in sale leaseback popularity.
Business people continually look for ‘creative ‘solutions to financial and cash flow challenges.
So lets recap the basic strategy - Your firm has equipment that has been fully paid for an is currently unencumbered collateral. Your interests are simply, you wish to sell the equipment, but at the same time you wish to continue to use the asset. Naturally the asset base of consideration for such strategies involves a broad number of industries and an even broader number of assets. More often than not need is very basic – how can you leverage assets to bring more cash into the firm? In certain cases, if a transaction is managed properly you can enhance you overall financial statement ratios .
So how does it work – it’s kind of simple, you ‘sell ‘the equipment back to a finance or leasing company. Under the umbrella of equipment financing and lease documentation your firm ‘leases the asset back ‘from the finance firm.
There are of course some key accounting issues that Canadian business owners and financial mangers have to take into consideration. Based on the value of the transaction your firm may have to book either a gain or loss on the transaction. As most assets depreciate in value more often than not you may be required to book some sort of a loss on the transaction
What are some of the other motivations for considering such a strategy? We can broadly group them into a couple of categories – i.e. Cash flow, accounting and tax, and balance sheet and income statement enhancement.
If your firm structures the transaction as a true operating lease when you enter into the sale leaseback you have somewhat m magically taken debt off your balance sheet and improved many of your key operating and loan covenants . The payments on this transaction create a monthly expense and this amount more often than not is less than the deprecation taken on the asset, so, via the magic of accounting your firm has created additional earnings! In cases where you do in fact have a ‘gain’ on the sale leaseback those also of course add to the profits of your firm. We love those accountants, right?!
In summary, Canadian business owners and financial managers should investigate the strategy of a sale leaseback of assets, in the current economic environment such a strategy can enhance your firms overall liquidity and profitability. That’s a good thing.
Does your business need new equipment to grow, but you’re not quite sure how to afford it?
Today’s competitive marketplace can make it difficult to stay on top of new technologies and advances in industry equipment. Without the right equipment, getting the job done may take longer, or become more costly than you can rightly afford. The good news is, there are ways to get the equipment you need and keep your business profitable! 7 Park Avenue Financial offers equipment financing solutions for businesses in Kitchener Ontario, providing realistic solutions that work with your business’s unique needs.
We’ll approach your business needs with creativity, making use of all the resources at our disposal – especially our connections with high-level management at a number of well-respected financial institutions! We get your voice heard at the top right from the start, so you don’t have to start from the bottom up. Our professional expertise ensures that we’ll provide the best equipment financing solution that works for your business, instead of trying to mould your business needs to the solution.
How do we do it? 7 Park Avenue Financial has a ‘customer first’ policy, which means that we listen to what you have to say before ever putting anything down on paper. We want to hear about your unique business needs and goals, and what kind of equipment you believe is best suited to take your business into the future. We want to become a trusted financial advisor for your business, so we’ll take your dreams for your business and build workable, personalized solutions. We don’t believe in cookie-cutter financing!
Our track record proves our word, and we welcome you to take a look at it here.
We know that being matched with the wrong equipment financing plan can become disastrous for your business, which is why your needs come first. Mass-produced solutions don’t address the unique nature of each client, and can often set you back even further!
Why not discover how 7 Park Avenue can help your Kitchener Ontario business obtain the right financing for the equipment you need? We want to help your business grow. Give us a call today!
How Can My Canadian Company Sell Or Remarket Equipment That Was on an Equipment Lease and is Not Required - By Stan Prokop - 7 Park Avenue Financial
Lease financing continues to be one of the major methods of equipment acquisition in the Canadian business environment. Business owners and financial managers of Canadian firms often with to replace older equipment with newer technology, and that can be of course anything from shop floor equipment to computers.
So what does the business owner do with equipment that he currently owns that was on a lease that has come to end of term? That equipment needs to be disposed of in an efficient and economic matter.
As a business owner you want to dispose of the equipment in a method that gives you the highest price while at the same time minimizing your expenses around that entire process. Back at the leasing company this entire process has an industry term, generally known as 'remarketing '.
In order to begin the process you need to look at a couple ' big picture ' scenarios - namely what do you currently believe the equipment is worth, and is there any sort of demand out in the market place for the equipment. If there is some solid sense that the situation can be advantageous in value to your firm ( we wouldn't recommend remarketing 1990 DOS based PC's..!) you need to asses what sort of costs will be involved and who in your firm will be primarily responsible for the divestiture.
So what's one of those 'bottom lines'? It is of course, what is the asset worth, and how do I determine that. Many industry publications for the asset type might provide you with a 'black book 'residual value on the equipment - that is similar to the 'black book 'we hear about at a car dealer's lot. Clearly this sort of number is only a guideline, as a lot of factors now come into play, like technology obsolescence (think computers!) as well as maintenance if in fact maintenance was applicable.
When you are looking at a disposition number that is reasonable you are in fact looking at three different numbers. Let's clarify that comment. You are looking for a number that matches the three industry terms -
FMV
OLV
FLV
Confused?? It's not that bad really. FMV stands for fair market value, and is a broad term which simply says that is it the price that a reasonable buyer will pay with no time constraints and some good market activity. It's quite comparable to selling your house and determining with the realtor what the current market will bear.
OLV is Orderly Liquidation value, and is essentially the auction process that might be held by you, an appraiser, or an auctioneer. The asset is put up for sale, and given current market conditions, is sold at highest bid.
FLV is forced liquidation value, and that is, from your perspective, kind of the ugly number - the asset has to be sold, it has to be sold tomorrow, who will give me what for it immediately, etc!
So the bottom line is we like FMV, we don't like FLV as the current asset owners.
Again, using our house analogy as an example you need to do some research into recent sales, that is of course because it gives you a ' comparable '. Your market research should come from both vendors and manufacturers and resellers of that type of asset.
In summary, disposing of a major off lease asset is a defined process. Care needs to be given to current market conditions and several industry terms revolving around the potential type of sale you will ultimately agree to. Successful completion of this whole process will allow you hopefully to enter into a new Equipment Lease financing transaction for assets to help your firm's growth and profits!
Equipment Leasing Canada - Why is Leasing Equipment a Solid Financing Alternative for Canadian Business Owners? - By Stan Prokop - 7 Park Avenue Financial
Leasing Equipment in Canada continues to be a major source of Business financing for Canadian business owners and financial manager. Many hundreds of millions of dollars was invested during the past year in plant equipment, computers, software, and other capital assets purchased by Canadian firms who are optimistic about the future.
The average Canadian cannot probably fully appreciate the breadth of assets that are financing by leasing companies in Canada. From aircraft, to computers, to office equipment, to mining and plan machinery, if it was a revenue producing asset Chief Financial Officers, business owners, and operations mangers all probably considered lease financing as an alternative to purchasing the asset outright.
There are many accounting and financial aspects to lease financing in Canada. Capital leases , which are leases presuming your firms ownership of the asset are recorded on balance sheets, operating leases are buried deep in the footnotes of your firms financials – in those cases you are using the asset with , generally speaking, no intent of owning the asset. With changes forthcoming in world wide accounting treatment of leases more and more firms seem to be opting for capital lease transactions.
One of the major beneficiaries of lease financing is IT leasing, aka computer leasing .As the Canadian economy continues to slowly improve after a somewhat disastrous 2008 and 2009 more and more firms are upgrading computers and technology . It is not surprising that in one of the fastest areas of ‘asset aging ‘, i.e. computers that more and more firms wish to upgrade assets.
When we start to consider the huge amount of capital expenditure that is involved in purchasing computers it makes perfect sense that business owners, ‘ IT ‘ managers, and chief financial officers reflect on lease financing as a solid solution for this asset class. Although computer and other related technologies (i.e. telecom) continue to drop in price and provide more performance at the same time the current low rate environment, in addition to cash flow savings, make lease financing a strong business financing choice. As we have said many times in the past, as a general rule you want to use a computer, not own one.
In many cases it is the manufacturers themselves that provide major incentives for the customer to finance technology via the equipment lease. This makes sense of course given they retain a certain amount of account control and influence on future purchases and upgrades.
Naturally prudent business owners and financial mangers will want to ensure they clearly understand the lease rates, their ability to purchase, upgrade or return the equipment, as well as having a solid knowledge of any hidden fees with respect to maintenance, returns at end of lease, etc.
Canadian business owners who place a strong importance on understanding all their financing options with respect to asset financing and leasing should ensure that they retain the services of a trusted an experience lease advisor who can ensure they will receive optimal rate, terms, and structures in their asset financing needs .
Equipment Leasing and Financing This article is going to discuss what is equipment leasing/financing, what are its benefits, leasing plans and how it relates to the start up and seasoned business.
Leasing is a form of renting but with a buyout clause at the end of the lease to take title to whatever we are leasing. The requirements to get into the lease may be as low as first and last payment and as much as 25%. Each situation is different and this offers the start up and seasoned business a way to invest very little monies into the business. Additionally, all other monies can be used for operating expenses such as marketing and other key areas. Leasing is not a new form of financing but could be a lending solution to the start up business. The small sample of type of industries that leasing can be used for are the following:
Dump,garbage, tow, flatbed, water trucks, over the road trucks and day cabs, heavy and construction equipment such as bulldozers, tractors, excavators, skid steer loaders, backhoes, flatbed, drop deck, refrigerated, dry van trailers, and industries which include limousines, limousine and shuttle buses, and machinery and production equipment.
The benefits of leasing may result in off-balance sheet financing reporting, tax incentives and conserving cash flow and preserving lines of credit for working capital purposes. Many leasing requirements may only require the initial outlay of first and last rental payment. Most leases finance 100% of the cost of the equipment such as soft costs which include shipping, software, training and installation. Additionally, leasing lets you regularly upgrade your equipment, eliminating your utilization of old, outdated equipment and reducing repair options.
Some of the leasing plans available to the lessee are $1.00, 10% or 20% purchase options as well as Trac Leases and FMV lease buyouts. Additionally, some lenders offer seasonal payments, deferred payments for ninety days, declining payments and half payments for a specified time period. It is important that the lessee understands all these different lease plans available as well as the buyout clauses.
The lessee has many options to consider in negotiating his lease. He must understand each lender's requirements and see if it fits within the realm of the lessee's requirements. Some lenders will accept the start up business whereas others will not want to lend to this group. They consider that their risk capital can be invested in other types of portfolios that can be better served. Many lenders require full documentation which includes a couple of years of personal income tax returns, a personal financial statement, and other underwriters requirements. However, in the past couple of years, there is a select group of lenders out there require an application only program. These lenders have their own computer scoring model and eliminate the necessary additional paperwork of other lenders. These application only programs are usually restricted to the seasoned business, however there are a few out in the industry which will work with the start up business as well. The amounts of the application only program run as high as $250,000 for the seasoned business and $100,000 for the start up. Additionally, the lender will lease the qualified asset probably from 36-60 months and many won't finance any equipment and commercial vehicles over ten years old.
It is important to understand the lease terms, the rate factor the lender is charging and the buyout clauses in the lease to take title. If you anticipate paying off the lease early, you should consult your lender to ascertain there is no prepayments for a early payoff. The last thing to understand that the lessee is going to guarantee the lease.
The last point to consider whether you are a start up and/of seasoned business due to economic conditions, there are some unusual specials available for off leases and repos. The lender has excess inventory on their books that they need to liquidated or re-leased as quick as possible. The minimum credit score for the applicant can be as low as 575 and prior bankruptcies may not be an issue in the credit decision.
Either way, spend your proper time investigating the item you are looking for to acquire, get the best price that you can obtain and secure proper financing.
Happy hunting... SOURCE - JM LUNA - EZINEARTICLES.COM
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