Equipment Lease Rates Leasing Company Offerings Got You Confused?

YOUR COMPANY IS LOOKING FOR LEASE FINANCING AND EQUIPMENT LEASE SOLUTIONS!

Understanding Equipment Leasing Companies

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equipment lease rates leasing company 7 park avenue financial

Equipment lease rates in Canada via a leasing company sometimes seem to provide clarity that is... well... clear as mud! So let’s examine some key issues that allow the business owner and financial manager to achieve solid lease pricing based on the asset type and credit quality of their company. And trust us... there is a leasing solution for every type of credit quality from blue-chip to ' bad credit ' scenarios.

OTHER ISSUES OFTEN AFFECT THE LEASE RATE

How does equipment leasing work, and how do leasing companies make money - We get that a lot at 7 Park Avenue Financial. While most business people associate the lease pricing ' only ' with the actual interest rate on the transaction numerous other issues need to be covered off.

THE SIZE OF YOUR EQUIPMENT FINANCE ASSET PURCHASE WILL POTENTIALLY AFFECT THE INTEREST RATE

As a starter, you need to have a good handle on what is known as ticket size in the industry. Three types of assets or ticket size dominate the Canadian industry. They are small, mid and large - no real secret there. But each of the companies that service that industry has different credit profiles that dominate how they price your transaction. Small transactions under $50,000.00 can be approved and priced within hours, rarely more than a day. Larger transactions are subject to a lot more analysis and documentation as we can imagine.

OTHER MISCELLANEOUS FACTORS AFFECTING FINAL LEASE PRICE

The actual documentation of each of our three ticket sizes varies and has price implications. Pricing can sometimes be affected by:

Usage

Maintenance requirements

End of the lease return language

Actual cost of the equipment

All of these are key elements of the leasing company might price your transaction, many times with no discussion with yourself, as it affects your transaction.

UNDERSTAND YOUR ' TICKET SIZE ' IN LEASING

Higher rates actually are many times associated with small deals, which may seem like a mystery to the business owner and financial manager. One simple reason is that while these small deals are approved quickly they have less credit due diligence associated with them - as such the lease companies have higher losses in this area - which of course affects overall pricing. If we are making one point it's simply that you need to understand which companies service which ticket size - because that is what reflects your final pricing.

LEASE TERMS RANGE BETWEEN 2-5 YEARS

Generally, shorter-term lease arrangements are never less than two years. That is because your lease company has also borrowed their funds, probably from a bank or insurance company, and they are striving to get a reasonable yield and profit. The lease term in equipment finance tends to be on average 3 years, but it depends on your assessment of the useful economic life of the asset being financed

Part of the whole exercise in lease pricing revolves around the ' lease vs. buy' scenario. That’s where you the business owner/manager should spend some time evaluating leasing as an alternative. If you're uncomfortable or experienced with that process your accountant or a Canadian business financing advisor can assist you in wading through cash flows, term loans as an alternate option, lease payment structuring, etc -

Key Point - Both new equipment and used equipment can be financed - Used equipment must be from a bonafide commercial seller, not a private transaction.

8 KEY CONSIDERATIONS IN EQUIPMENT FINANCING

As we said previously the business person tends to only associate the implied interest rate on the deal as the pricing determinant. But other issues to consider are:

Tax / Accounting implications

Down payments / Documentation fee

Upgrade formulas that change the rate

Excess usage charges

Operating lease price implications

Preservation of line of credit facilities

Types of Equipment re obsolescence issues, etc

Term Loan or Business Loan alternatives to Lease finance

Types Of Equipment Leasing - Companies may choose capital ( lease to own ) versus operating ( lease to use ) solutions

So, is it always about the ' low monthly payment '? Definitely not! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor as to how equipment lease rates via your leasing company work... against you... and for you!