No secret that in today’s competitive environment any advantage business has over the competition is valuable – that’s an understatement. So, if you accept that software of all types’ runs grows and operates your business, doesn’t it make sense that you are up to speed on business software financing options for your systems? We think it does, so let’s explore what you might not know about software finance lease and loans in Canada.
The reality that comes as a surprise to many clients is simply the fact that technology can be leased. In today’s terms that covers hardware systems (servers, pc’s, laptops) as well as software (our subject today) and the new leasing asset on the block: solar, wind and cleantech assets.
There are some key issues that differentiate software financing in Canada. Issues that you have to consider and take into account are the types of leases offered in business software financing options, the doc’s that come with that lease, and probably of prime importance to our clients, how these leases are priced .
Software itself is a broad term, we refer to software you are developing (yes it can be financed) as well as the applications you purchase. Many transactions in Canada are software only leases and loans. A present surprise to our clients is often the fact that the actual software licenses can be financed also (remember, you use the software, you dont own it).
Many great technology financing occur when you utilize the concept of ‘ bundling ‘ – that is to say you acquire hardware and then bundle in numerous soft costs, including software to achieve a blending pricing and maximum financing of your transaction .
In technology finance when it comes to hardware you should often consider an operating lease for the hardware component of your transaction. The software and other soft costs (training, licenses, maintenance, install, etc) are financed at what the industry terms as ‘ full pay out ‘. By combining the
rates on both parts of the transactions you achieve a blended rate which makes your overall business software financing attractive from the lease and loan perspective .
Let’s use a quick example to illustrate –
You buy a 100K server and related ‘ hardware ‘ and agree to finance it a 3 year term. Additionally you require, and acquire 50k of software. What would the monthly payment be on this transaction?
We maintain it could well be in the 4.1k range per month on a 36 month term. That interest rate works out to about 1% or less, because the operating lease subsidizes the software financing.
Want this and other advice on proper tech financing and business software financing options on your systems and technology assets. Speak to a credible, experienced and trusted Canadian business financing advisor with software and tech finance experience. Options you thought you never had will become available, immediately.