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Exploring A Wide Variety Of Equipment Lease Financing Solutions
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Financing & Cash flow are the biggest issues facing business today
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EQUIPMENT FINANCING NEEDS?
Nobody likes being called a ' Slacker '. And you don't need to be. When it comes to equipment financing in Canada a little bit of work and knowledge from small businesses can take you a long way when it comes to utilizing new assets for profits and sales growth within your firm.
Whether it's heavy machinery or computers and software a lease or a business loan understanding financing for equipment and technology and asset finance strategies will always help the business owner and financial manager make the right decision.
And by the way, the right financing will always assist you in your working capital and cash flow challenges, not to mention everyone's favourite - capital budgets! Here's what you need to know!
UNDERSTANDING THE FUNCTION OF THE LEASE COMPANY IN CANADA
Managing a relationship, either long term, or even once with equipment finance companies is all about understanding where the other party is coming from. You have a reason to require their services, and in the current Canadian asset finance environment, we can assure you there’s lots of competition out there versus bank financing/lines of credit for those looking for partners to finance your business and who want firms providing financing options that you need to acquire the assets you need to run and grow your business.
Whether it's technology leasing or construction equipment almost any asset, including software! can be financed. It's about though, understanding where the lease firm is coming from. Their charter is pretty close to yours, making a profit... on your firm. It’s your job to make sure it’s a 'reasonable profit '!
THE FLEXIBILITY OF LEASE FINANCING SOLUTIONS
The Canadian lease finance industry touts itself as a 100% full financing business. That is to say very little... if any, a down payment is required for the financing of assets, and don't forget also that you have a lot of payment flexibility with respect to staggered payments, seasonal payments, quarterly payments, etc., etc. and on it goes.
So if you do have reasonable credit quality make sure you are bargaining hard for little to no upfront payment and focus on cash flow monthly payments that make sense for your type of business. Remember also that new or used equipment can be financed, although used assets must be part of a commercial, and not a private, transaction.
HOW IMPORTANT IS THE INTEREST RATE IN THE LEASE FINANCE TRANSACTION?
Fortunately or unfortunately our clients are always pretty well just focusing on the implicit interest rates in a lease. ' Great rates ' seem to be always top of mind for business owners. When they feel they have won at that game they feel they have entered into the consummate leasing transaction... via the ' monthly payment '.
While your lessor does in fact make most of its profit on the rate it should never really be considered the be-all and end-all. Other factors include the quality of the documentation you are being asked to sign, the residual value of the equipment at end of term, and any tax and accounting benefits that you and the lessor split or share.
So yes, equipment financing companies borrow money themselves to stay in business, and the more they can charge you equates to more profit, but remember those other issues also. While an owner credit score may come into play on some transactions in general financing the right equipment you need will come to the overall financial strength of your business.
Businesses with ' bad credit ' will also find lease finance accessible given transactions can be structured to meet the company and lenders' needs when it comes to business credit profiles and requirements.
Small and medium-sized businesses will always find a competitive financing offer from a broad range of firms in Canada. Talk to 7 Park Avenue Financial about what solution is best to provide financing for your business needs and growth via a wide array of financial products and solutions that might even be 'non-lease in nature.
Oh and one final point on that whole ' rate ' issue. In the 2021 timeframe, the leasing financing industry is very competitive, so your sales, profits, cash flows and balance sheet have already pretty well determined what your interest rate is. Enough said on that subject.
END OF TERM ISSUES ARE CRITICAL IN EQUIPMENT LEASING IN CANADA
We mentioned the value of the asset at the end of the term as another key component you need to think about when leasing equipment when assessing potential financing solutions. If you are returning the asset to the leasing company they have spent a bit of time already, unbeknownst to you it would appear!
Deciding useful life and what that asset will be worth a few years from now when your lease ends. Soft costs in many equipment purchases can also be funded on credit approval as part of your lease strategy. Third parties such as resellers of equipment can also use leasing as a sales strategy for their products and to acquire new customers.
Let's say that’s 10%. They then price their lease according to not only credit risk, but what is known as the residual value of that asset a few years out.
By taking some time to understand that value yourself you have some negotiating power and importance of price and lease structure and term in equipment financing, as well as, of course, the tax benefits and accounting benefits that come with equipment finance. Very significant asset purchase may be financed with terms up to 10 years, although typical lease terms tend to be in the 2-5 year range.
THE SALE-LEASEBACK OPTION?
Business owners should know that existing equipment can be financed under a sale leaseback solution - For more info on sale-leasebacks click here. Business equipment and technology assets often continually need to be updated/upgraded.
CONCLUSION - EQUIPMENT LOANS AND LEASES IN CANADA FOR ENTREPRENEURS
So, our advice? When it comes to equipment financing companies leasing financing in Canada don't be a slacker when it comes to dealing with equipment finance companies!
A classic case of a bit of knowledge saving you a lot of time and money! Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your lease finance needs.
FAQ: FREQUENTLY ASKED QUESTIONS
What equipment can be financed?
Equipment financing is a type of small-business loan designed specifically for the purchase and installation of assets and technology essential to running a business. You can use an Equipment Loan such as office technology, computers, software, medical devices or heavy equipment and farm machinery at competitive pricing.
Can you finance used equipment?
If you're looking for a way to save money on your next equipment purchase, consider financing the deal with used or preowned goods. Tax advantages that come with purchasing an asset at auction or a commercial sale mean even more cash conservation for business!
What is an equipment finance lease?
Equipment leasing is a form of financing in which businesses rent /lease expensive equipment rather than purchasing. Business owners can lease machinery, vehicles and computers to run their businesses for specific periods at competitive interest rates
Leasing has many benefits including no down payment. Equipment leasing is a great way to finance expensive equipment. The small business owner only pays for what they use, and as such the more it's used in your company means less out-of-pocket costs!
A lease agreement will have some terms that an entrepreneur must know before signing on with them- this could include how long each item can be rented under, any maintenance fees involved (if any), etcetera... Equipment leases also come in two types: capital or operating leases.
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