Let’s get the acronyms out of the way – IT is of course Information technology, and hundreds of millions of dollars of computers, software, and related technologies are acquired by Canadian businesses every year. Equipment leasings lets you minimize those large capital investments.
COMPUTER LEASING FOR SMALL BUSINESS ( AND COMPANIES OF ALL SIZES !)
So why is ‘IT equipment leasing' the chosen method of financing from firms who lease business equipment?
The reality is that these assets make your firm more productive and competitive – and equipment financing and equipment leasing simply remove one of the major obstacles to your innovation – that obstacle is the cost of the equipment. Although the cost of technologies seems from a distance to be always going down (thinks PCs and servers, etc.) the overall sticker shock of your total investment is still a huge potential outlay of valuable cash and working capital.
LEASING VS BUYING COMPUTERS FOR BUSINESS
Let's examine why the main advantages of leasing make total sense in the context of IT equipment leasing via the right leasing company. We’ll also discuss how you can actually get this type of financing in place.
First of all, and we hate clichés, but cash is (still) king! And most firms simply don’t have the cash available to pay for all their technology needs. You also don’t want to be in a position to match long-term capital acquisitions with short-term working capital availability. So your ability to match the anticipated useful life of the equipment with cash outlays is a considerable advantage. That’s what lease financing does of course.
Canadian rates are very attractive and although they are low they are expected to go up – leasing will often give you the option of fixing or locking in rates.
Whether your firm is large or small you need and have access to bank facilities or working capital lines – maybe you are even self-financing? A lease for business equipment leaves those credit facilities untouched. Even global supply chain constraints might affect IT Hardware pricing -
Also, put your hand up if you have any input on this one, but lease financing is usually achieved with a basic business credit application and applicable information such as your financials, projections, etc. It is arguably the easiest way to get business financing approved in Canada.
THE RIGHT LEASING OPTIONS
In general, any investment in technology makes you competitive and in many manners allows you to cut costs, simplify processes, etc. Putting a financing solution to that technology and business improvement seems like a very solid decision.
The reality is that if your firm requires it computer leasing you quite frankly don’t have a lot of financing options. Bank term loans in general don’t make sense for technology that in general depreciates in value but still has a direct benefit to your firm. Upfront costs can also be bundled into a lease option.
Many computer leases are constructed around the concept of an operating lease / fair market value lease offered by top leasing companies - There are essentially only two types of equipment leases in Canada, capital and operating.
The opposite is a capital lease, ie leases to own, as opposed to operating leases which are leases to use!
When financing technology, IT, computers, etc. you should probably consider the benefits of an operating lease – they have a lower cost, a lower monthly payment, and you have a triple option at the end of the lease term – you can return, purchase, or upgrade. That’s true flexibility as opposed to purchasing equipment outright.
LEASING IT EQUIPMENT PROS AND CONS
So if you are focused on technology acquisition consider lease financing – we have shown it is a better and more appropriate use of cash flow, it is generally easier to obtain, it hedges you against obsolescence of your acquisition, and may even have some solid tax and balance sheet advantages - i.e. maintaining your existing credit lines -
To learn more about the pros and cons of leasing technology needs read this great article from Entrepreneur.com
If you have solid cash flow, buying equipment may be best because it typically comes with a lower overall cost of ownership.
Don't forget also you can add assets to an existing lease, as well as ongoing maintenance costs and services solutions.
CONCLUSION - FLEXIBLE PAYMENT SOLUTIONS TAILORED TO YOUR BUSINESS NEEDS!
The Canadian lease financing business via equipment leasing companies is both specialized and competitive.
We strongly recommend you seek the assistance and resources of a lease financing and business financing advisor who is knowledgeable, credible and experienced in IT computer leasing and who can help you facilitate lease terms.
Speak to 7 Park Avenue Financial and we think you will agree that The advice you receive on the right lease offerings the best lease structure, and what competitive interest rate you might be a candidate for could save you thousands and tens of thousands of dollars while helping you meet your key business objectives.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What type of equipment can be leased?
Almost any business asset can be leased - that includes production equipment for manufacturing companies, heavy equipment in the construction industry, technology via software and hardware solutions, HVAC systems and rolling stock for trucks, autos, etc.
What is an equipment lease?
Equipment lease solutions are a type of business financing that allows a business to rent assets versus purchasing them outright - lease options allow the user to either retain ownership at the end of the lease or return the asset . Business uses this finance solution to help manage the capital inestments required in technology or other fixed assets.
Is it better to buy or lease a computer for business?
The ultimate use of the asset will dictate whether an equipment lease solution is a good option - assets that are for short-term use or that depreciate significantly should often be financed - long term assets are more suitable for term loan solutions.
If you have solid cash flow, buying equipment may be best because it typically comes with a lower overall cost of ownership.
Is leasing equipment tax deductible?
Equipment that is financed via a lease will allow for monthly payments can be expensed as a deduction if the lease meets accounting lease requirements .
