Asset Financing For Equipment & Technology Needs Is A Winning Strategy

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Asset financing in Canada is all about acquiring in a responsible manner the assets you need to both run and grow your business. When we follow the 'crumb trail' on this financial strategy it almost always leads to leasing and equipment loans. Let's dig in!

The 'property, plant and equipment' you need is many times assets that will have production capabilities for your business.

What is the best financing option, or is it actually better for a firm to pay cash for these types of asset acquisitions?

Certainly outright ownership has its benefits, but at the same time valuable cash resources are drained from your business when you buy an asset for cash, especially an asset that is depreciating in value.

For that reason the majority of business owners seek out equipment financing/lease financing solutions for capital asset acquisition. Depending on what industry your company is in the investments required in capital might be very significant. In today’s economy that might even mean investments in technology, such as computers, software etc. (Yes Virginia - software can be financed!)

We would also point out that even used equipment can be leased/financed. The emergence of the internet allowed firms to scour the world in an effort so sources assets that still have value and economical pricing that otherwise might not have been accessible in previous times.

Part of the attractiveness of leasing/equipment loans revolves around the fact that when properly structured the assets remain yours at the end of the lease term. In cases where ownership is not required or is not critical operating leases might well be considered. Wear and tear will simply often make many assets unusable after a period of time.

The obvious benefits of lease financing are touted often - there are other hidden benefits also. One of those aforementioned obvious benefits to equipment financing is simply the ability of your firm to save cash flow and working capital - if cash flow and working capital are ' king ' as they say, then clearly in the challenging business environment of 2010, they have been re-crowned!

You can further augment your cash flow and working capital by giving consideration to a sale leaseback strategy. In this scenario you are maintaining the use of assets you already own and have paid for outright - the strategy completes itself by your firm selling the equipment back to a lease company and paying for it over time again, usually 3 years as an example. Cash proceeds from the sale of the asset you are using go into your company for working capital needs. Many business owners and financial managers in Canada overlook this strategy.

We mentioned some of the lesser-known and perhaps less obvious benefits of lease financing. One of those relates strictly to your ability to understand your options at the start of the lease. If you find that you might not want to own, or continue to use the equipment at the end of the lease term you should opt for what is known as an operating lease.

Could there actually be even another benefit to the transaction we have noted above? Yes, because under a true operating lease your overall payments and actual cost of borrowing will be significantly lower - sometimes by 10 - 20 %, versus if you had chosen a lease to own strategy.

Equipment financing can be complex, and the ability to negotiate a proper rate, term, and structure for your firm can be a daunting task. The challenge is further exacerbated when business owners are not knowledgeable enough to relate the pure acquisition to the balance sheet, income statement and other benefits that relate to a properly structured lease.

We, therefore, recommend you seek out the expertise of an experienced, credible and trusted lease financing advisor who can assist you in your firm’s asset financing needs.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Asset Financing Leasing Equipment Loans 7 Park Avenue Financial