Lease Leasing Rates Approvals 7 Park Avenue Financial

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‘What’s my lease rate?' is a question I am often asked by customers when they work with us with respect to equipment financing approvals.  They are surprised when I tell them that they get to pick their own rate!  (All customers want the lowest rate!)

I am not trying to be facetious when we make that statement. What we are saying is that the overall credit quality of a customer, as perceived by the lender (that’s important!) is in fact set by the customer, thereby driving a final approval on rate, term and structure of the proposed financing request.

The role of the customer or their trusted advisor acquiring lease rates for asset acquisition is to understand the basic credit information requirements and how the overall risk to the customer and their industry will be perceived by the lender. The irony of a lot of leasing rates in the business of leasing is that the industry for the most part used historical analysis to project future ability to pay.  That is a difficult concept for the customer to handle more often than not - as an example the customer may have lost some money last year, driving a negative cash flow figure. Prospects have improved, new orders are coming in, and yet the business has a problem in getting new financing.

The customer needs to ensure that the information and 'story' make the equipment financing transaction become more 'approvable'.

APPROVAL CRITERIA FOR LEASE FINANCING

Critical categories in the information submitted by the company are as follows:

Length of time in business

Personal credit history of the owners

Relationships with other financial institutions

Quality of the financials (Some customers submit balance sheets that don’t balance!)

Additional collateral available if necessary

Summary of key financial info such as depreciation, cash flows

A positive focus on management and its background and experience

It's these factors that affect lease rates in Canada.

If the customer is qualified to make such a submission a solid package as per our list noted above should lend itself towards approval at current market rates and structures. If the customer feels they are not properly qualified to make such a submission they are strongly encouraged to use a qualified intermediary who knows the industry and, more importantly, knows the specific weighting given by a lender to the above-noted submission requirements.

The amount of information required around each component is more often than not determined by the size of the transaction or the lender's total exposure to that customer. In many cases, small ticket transactions (those under $25,000.00) are adjudicated via a credit application and public reporting sources such as Equifax or Dun and Bradstreet. Typically 60-70% of all small ticket transactions are approved.

In summary, customers who want to get a prompt and of course positive lease approval should focus on providing a clean package of required information that will ensure prompt approval based on specific industry requirements around the transaction size and asset type.

Knowing that the lender will focus on the future potential of the firm, the management experience, and the collateral asset are the valuable data points regarding lease rate approvals for any business seeking a business equipment financing lease. Speak to a trusted, credible and experienced Canadian business financing advisor for the help you need for great lease finance rates and prompt approvals.

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Stan Prokop 7 Park Avenue Financial/Copyright/2020