YOUR COMPANY IS LOOKING FOR BUSINESS ASSET FINANCE
LEASING SERVICE!
You've arrived at the correct address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the most significant issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
EQUIPMENT FINANCING
Leasing company solutions can be the actual ' success story ' of any business that requires assets and technology. But does the business owner/financial manager really understand how to maximize lease financing benefits achieved from this method of asset financing for leasing business equipment? Let's dig in.
CATEGORIES OF EQUIPMENT LEASING
Over the years, the lease finance industry has gravitated to financing every type of asset - they call that from ' micro ticket ' to ' large ticket, 'which can be an office photocopy machine for 2k or a corporate aircraft for 20M$.
The borrower, aka ' the lessee,' knows the differences between applying for and getting approved for different asset categories. Owners/managers can also waste a lot of shoe tread in dealing with the wrong firm regarding your company's credit quality, geographical location, etc.
When it comes to the small ticket market via equipment leasing (people disagree on the exact maximum deal size within this market segment), a large part of the financial approval is often based on owners' personal credit history and guarantees. Suppose your company doesn't have a truly very strong profile (strong = growing sales, growing profits, increasing cash flow, acceptable debt levels). In that case, it can almost be guaranteed that personal guarantees will be requested.
We want to mention guarantees that owners/managers who can present their company financials properly can often have some 'wiggle room ' in the personal guarantee conundrum. That might mean a ' partial guarantee ' or a ' declining balance' guarantee. In some cases, it might make sense to negotiate the type of ' covenants ' often related to bank loans - i.e. debt to equity/working capital ratios.
Old-school credit granting is not quite dead yet, so traditional criteria such as years in business, the usefulness of the asset being financing relative to revenue/profit generation, and commercial credit references can also play a large part in the overall approval process. A good credit score for the business owner will help on smaller transations.
A business plan for very large transactions might be beneficial but is rarely required. If there is one good thing happening in financing approvals, timelines are close to instantaneous in the small / mid-market - typically the same day or 48 hrs max. All your business has to do is achieve your best price on the purchase ! Bank financing will typically take much longer for approval, and banks prefer business loans, not leases.
We've always maintained that clients focus far too much on rate, if only for the reason that that finance lease companies are in a highly competitive environment - ultimately, your firm’s credit quality will always drive the lowest rate in a competitive environment. Owners/managers would be cautioned to spend more time on areas such as monthly payments, terms of the lease, renewals, buyout options, and down payments or security deposits that might, on occasion, be required.
While we're talking in the main about ' leasing equipment companies ', remember that term loans for equipment leases might ultimately make as much sense for your financing needs - Also, assets already owned can be refinancing under creative sale-leaseback or bridge loan scenarios for all assets, including technology, medical equipment, rolling stock, etc.
Heavy Equipment Leasing And Used Equipment Leasing are general categories of Asset finance in Canada. Private sale transactions that are non commercial in nature generally can't be financed via business loan / lease.
Assessing Your Lease Requirements from financing services for commercial equipment and technology :
It's important to spend some critical time on assessing your asset leasing requirements - Issues such as budgeting for capital acquisitions and understanding cash flow implications are essential. Knowing your budgeted amounts helps you negotiate better prices and financial terms with your lessor and your equipment supplier.
It is also critical to understand the valuable life of the asset as it pertains to your business. Lessors like to finance assets that help a company grow both sales and profits.
That process we just described will also let you then match the lease term to the useful life of the asset. Companies that are in growth mode will constantly be acquiring new assets to run and grow their businesses, and that's why the issue of consideration of the obsolescence of the asset is critical.
It's nice to know that there are no upper limits on the amount you can finance subject to credit approval re your overall credit profile. Small leases can be written for assets as low as a few thousand dollars.
More significant transactions for leasing companies in Canada will receive a lot more credit diligence regarding financial statement analysis, cash flow reviews, and consideration for nuances in the particular industry your firm might be in. Unfortunately, some industries temporarily find themselves ' out of favour. ' The interest rate for an equipment loan will always vary based on credit quality when it comes to competitive terms , one of the many advantages of any company being able to achieve approval.
We can't overemphasize the need for time spent on documents - that might be a ' Master lease ' scenario or the rights and obligations you have under an operating lease. The ability to ' add on' to any current lease transaction is typically always available.
Amortization terms for finance lease companies tend to range from 2-7 years. In truth, most transactions are on a 3-5 year term, which makes sense for a large category of different asset types.
BENEFITS OF EQUIPMENT LEASE FINANCE
What then are the most touted and real... Financing company benefits of equipment finance – they include :
Ability to access other credit facilities other than current borrowings
Rates
Ability to finance 100% of any asset acquisition
Capital vs Fair Market Value Operating Lease Solutions - The end of the lease flexibility solution
Low or No Down Payment Financing
Upgrade Options / Trade In's
Specialized Tax Treatment
At 7 Park Avenue Financial, we try and present a balanced overview to our clients who are considering loans or leases in their asset acquisition strategy. So we are the first to point out that there are finance charges/interset attached to equipment leasing.
Occasionally, it might make sense for a company's financial officer to determine that outright purchasing of an asset makes more sense to the company. Also, lease-to-own strategies, called ' capital leases, 'are Canada's most common form of asset financing. There are no prepayments on this type of financing, as these lease agreements typically include a ' hell or high water ' clause.
The business capital to both own and operate business assets places a heavy demand on cash flow; Additionally, more and more current and up-to-date holdings in various technologies require constant replenishment of assets. The lease vs buy decision process has become a continuous source of management analysis for acquiring assets.
FACTORS THAT MAKE UP LEASE VERSUS BUY CRITERIA IN CANADIAN FINANCE
Numerous factors play into the leasing vs purchase decision around your financing requirements. They include:
The total cost of the asset
Depreciation and Accounting Implications
Taxes
Monthly cash outflows
Intended use and importance of the asset
Costs to maintain and upgrade and repair the asset
The ability to buy assets and pay for them on a known fixed monthly installment appeal to business owners and their financial managers. Also, not everyone knows that miscellaneous services attached to asset acquisition can be bundled into a lease transaction - Those services might include maintenance, updates, multi-year service agreements, etc.
Technology finance is a large part of the current leasing market. Firms acquiring computers and software ( YES, SOFTWARE CAN BE FINANCED !) can better manage their investments in r&d and technologies.
CONCLUSION
A leasing company specializes in providing lease agreements to businesses and individuals, allowing them to use assets such as equipment, vehicles, or property for a specified lease period. Through this arrangement, the leasing company maintains ownership of the asset, while the lessee gains the right to use it in exchange for lease payments.
A finance lease, also known as a capital lease, is a type of long-term lease agreement that effectively transfers the risks and rewards associated with the ownership of the asset from the leasing company (lessor) to the lessee. Under a finance lease, the lessee is responsible for the leased asset's maintenance, insurance, and taxes. The lease liability and the leased asset are recorded on the lessee's balance sheet, while the leasing company records the asset as sold and recognizes the corresponding lease receivable on its balance sheet.
The lease period in a finance lease typically covers a significant portion of the underlying asset's economic life, and the present value of lease payments amounts to a substantial portion of the asset's fair market value. At the end of the lease term, the lessee may have the option to purchase the asset at a bargain price, transfer ownership, or return it to the leasing company.
In a finance lease, the lessee records lease payments as a combination of interest expense and principal reduction, which reduces the lease liability over time. The leased asset is depreciated over its useful life, resulting in an amortization expense on the lessee's income statement.
Leasing companies play a crucial role in helping businesses manage their working capital by offering financing options such as finance leases. This enables companies to acquire and use assets without the upfront cost of purchasing them, thereby preserving cash flow and working capital for other operational expenses.
Click here for the business finance track record of 7 Park Avenue Financial
If you're looking to maximize the benefits of solutions from a finance company in Canada speak to 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your asset finance business needs and flexible options & competitive pricing you are looking for when purchasing best equipment and technology for your small business.
