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Advice on Canadian leasing company Equipment And Finance Loan Transactions

Guest post by: Stan Prokop

Article Overview: Information on Canadian leasing company asset acquisition.What advantages your firm can utilize when contemplating an equipment finance loan for assets being acquired .

Advice on Canadian leasing company Equipment And Finance Loan Transactions

Canadian and U.S. firms finance billions of dollars of business assets via an equipment loan every year. Leasing companies provide some of the strongest benefits for capital acquisition than any other type of financing. Let's examine what some of those advantages are, and provide you with some clear tips and advice on obtaining the best equipment financing rates and structures.

Your firm only has an advantage when it is benchmarked against another alternative. That alternative in business financing tends to be outright purchase of the assets.

Canadian business owners and financials managers tend to be less aware of the accounting and financial aspects of an equipment lease. The most obvious advantage is simply that you know on a monthly recurring basis what your payment is - which hopefully you have budgeted for in your cash flow and working capital outlays.

Some of the best advice we can provide clients with is tips on selecting the right type of equipment finance lease or loan transaction. That revolves around the concept of either ' owning ', or ' using '.

If you wish to own the equipment at the end of the lease term you need to pick what is known as a capital lease or ' full payout' transaction as it is known in the industry. The concept is simple - The elements of the lease are the term, interest rate, end payment, monthly payment, and of course the value of your transaction. Using a financial calculator you can calculate any one of these key finance loan elements if you know the other data points.

Business changes constantly and so do financing rules on occasion. Many Canadian business owners and financial managers are not aware that there is an international accounting movement afoot to significantly diminish the value of operating leases, which is the other type of lease that leasing companies offer. This is a ' lease to use' transaction, where you have the right at the end of the finance transaction to return the equipment if you choose.

Over the years the key advantage of operating leases was that you could record the transaction off your balance sheet, it was simply an expense, and didn't alter your debt and equity ratios, etc. However, international accounting standards are now going to require that you show the transaction on your books.

So the best advice we can give you is to discuss that issue with your accountant. Quite frankly a lot of the other benefits of operating leases still probably make it worthwhile - they have lower payments than a regular lease, and you still have that option to return the asset when you no longer require it at end of term.

Additional advice on your leasing company search or negotiation revolves around the whole issue of cash management. Did you know that you can potentially structure your transaction for payment flexibility, as well as adding in several intangible items such as warranty, delivery, installation, etc?

So what's our bottom line - simply to research which benefits make the most sense to your firm, pick the lease that suits your business and accounting needs, and speak to a trusted, credible and experienced Canadian business financing advisor about a leasing company that matches your firm's needs.

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Article Tags: equipment finance, finance equipment, finance loan, leasing company, loan



Related Forum Posts
Equipment leasing - Equipment leasing has many benefits, such as tax benefits, conserving money and always having up to date equipment to stay competative to name a few. Obviously, it's partially dependent upon what type of business you have as to whether you will benefit more than someone else but... Do you think it's worth leasing your equipment rather than purchasing it? Can you think of any other reasons you can benefit from it or any reasons this is not a good idea?
Re: Expanding to the US? - We are an active Canadian Company that wants to expand into the US. Is the best approach to division with another company? Yes, we have a few companies in mind that we have been in contact with in the US. But we want to consider all our options first. How do we do it on our own? Example> Stantec is whole wide, how did they do it? Coke Cola sells world wide. We are looking for any information to help get us started or point us in the right direction. Whether it's a great book or a website to check out. How do we share a great Canadian company with the US market? Thank you for all your ideas.
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Leasing advantages/ disadvantages - Nana compiled a great list and as you can see, there are more advantages than disadvantages when weighing this as an option. Also- I'd like to address one of those disadvantages- the one where you have to pay one or a few payments first. while it's true that most leasing companies will only have you put down one or two months in advance to get the lease and equipment. But when you compare this to the cost of a loan down payment (when including equipment to purchase within your business loan) or the cost of purchasing outright, you really come out ahead with the lease, which leaves more money to improve your cash flow. Your business loan size would be smaller, which ultimately makes your loan down payment smaller so it's a win-win for you! Also- if you are dealing with the right equipment company, they can include additional soft costs in your lease, such as training, maintenance & installation costs. Kevin- that is a perfect example of how one can benefit from up-to-date equipment when leasing.


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