100% comfortable? We’re talking about dealing with business equipment leasing companies and the financing of business assets. Equipment financing is simply a tool to achieve the acquisition of assets. Canadian business owners have different reasons to enter to an equpment lease finance transaction – those reasons might be cash flow oriented, tax oriented, or financial measurement oriented.
Let’s examine 8key basics around which successful lease financing is based in Canada. Most business people appreciate the fact that leasing often covers off anywhere from 90-100% of the cost of the asset, but did you also know that numerous ancillary costs can be bundled into your transaction? They include delivery, installation, maintenance, warranty, etc. Those additional costs can add up.
Pick you term .That’s our # 2 reason. Prudent business owners and financial managers will give thought to the term of their lease, optimally identifying the useful life of the asset with cash outflows. In Canada typical lease terms range from 2- 5 years, shorter terms are almost impossible, longer terms are possible when the asset and credit quality of your firm permit.
Our 3rd Reason – simply flexibility around payments and your cash flow . Your monthly payments on an equipment lease can easily be structured into step payments ( paying more later ), skip or seasonal payments, etc. In business it’s all about cash flow and cash flow benefits count big in Canadian equipment lease finance.
Reason # 4- Lease vs. purchase and cash flow considerations. The majority of business owners will find that if they run some analysis around their cost of funds as well as what they would be able to do with funds otherwise not spent on the purchase of assets . In the 2011 business environment rates are low and leasing is ultra competitive, so the overall rate environment simply enhances your lease vs. buy decision.
Reason #5 – loan covenants and financial measurements. Many Canadian businesses, especially those with bank financing in place may find it challenging to acquire assets without breaching loan and ratio restrictions imposed by the bank. Carefull structuring of lease transactions can eliminate this challenge. As well many firms measure their management and owners on financial criteria such as return on assets and return on equity. Business equipment leasing companies can help you win when these measurement scenarios are in place.
Reason # 6 – You can more often than not expect approval on a lease financing decision much more quickly than a loan or other type of financing solution. It is certainly very typical to obtain a full lease finance commitment within days of submitting a proper request (key word = proper).
Reason # 7- the ultimate value of your asset can be a significant financial benefit to your company. You might be acquiring assets that have a useful life beyond the term of the lease. This asset can be either sold or re financed at the end of the term, enhancing your firm’s cash and working capital.
Reason # 8 – The Paperwork. In general we can make the comment that documentation in Canadian equipment financing is efficient. Whether you have a master lease in place or if you are simply acquiring a small business asset lease docs are simple and easy to understand when you’ve dealing with business equpment leasing companies. In Canada the industry is broken down into small, mid and large ticket transactions. Small deals can be approved in hours, larger transaction takes a bit, but not a lot more time… again, if properly document and presented.
Speak to a trusted, credible and experienced Canadian business financing advisor on the benefits of dealing with business equipment leasing companies for financing of assets. It’s clearly a win win scenario!