Lease Financing Approval Canada 7 Park Avenue Financial

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Are you having challenges in getting lease financing approvals in place in Canada for your assets and capital expenditures? The current difficult economic environment makes it more challenging than ever for Canadian business owners to get the proper rate, terms, and structure that they deserve. Let’s share some expert tips on what you need to understand for solid equipment financing approval and success.

Success lease equipment financing requires a working knowledge of what the lessor is looking for in a transaction.

Owners can safely assume that the lender is doing significant work on financial statement analysis to satisfy them they are making a proper financing decision with your firm. Included in this analysis is a strong emphasis on cash flow history and projections, operating efficiencies of your firm as measure by industry accepted ratios, and balance sheet analysis with respect to the amount of debt your firm is carrying, etc.

In our previous article, we suggested that business owners should be aware of some key 'structuring options' that lenders use when they are contemplating an approval that they are not 100% comfortable with.

These options, previously discussed were:

- Utilizing higher rates to compensate for risk

- Use of Security Deposits

- Use of advance payments

- Structuring higher payments in the earlier years of the lease

- Shortening the lease term to offset long term risk

Business owners should be aware of some additional enhancements that can further a financing approval when your firm might not fully qualify for your desired amount of financing and overall structure.

Let's looks at some of those additional enhancements that complement the 5 areas we have noted above.

Business owners who are not familiar with some of these financial nuances should employ the use of a trusted leasing advisor with credible experience, thereby significantly increasing their chances of getting a lease financing approved.

Business owners might not always be comfortable with providing a Personal Guarantee on the transaction; however personal guarantees are a clear fact of life in the Canadian business financing environment. The logic of the lender, in this case, your equipment lessor, is that you are more motivated to make those payments if you are personally obligated in the matter also.

Naturally, companies incorporate to avoid personal liability but business owners are often called upon by lenders, lessor, etc. to provide a guarantee. It goes without saying that the lender will also want to validate the quality of your personal guarantee.

In many cases, you as a borrower or the lender might request additional collateral on the transaction. This would be collateral that is currently unencumbered, but in effect shores up the lessor's overall position, allowing your transaction to be approved. In many cases, you will be required to provide some form of documentation (usually an appraisal) of the additional asset.

In some circumstances effective additional collateral might be credit life insurance on the transaction - in a smaller of mediums sized Canadian firm the lender / lessor may rely on that insurance in the event something happens to the owner, that something being 'death' of course!

Not all Canadian business owners know that in some cases the manufacturer that you may be purchasing and financing the equipment through is in some cases agreeable to providing a limited or partial guarantee on your transaction.

They are making a sale, generate profits from the sale to your firm, and may be able to remarket the asset if the lessor requests assistance in this area. Speak to a trusted, credible and experienced Canadian business financing advisor to ensure you have the ability to successfully meet your equipment leasing and financing needs.

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Stan Prokop 7 Park Avenue Financial/Copyright/2020