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Canadian Lease Financing -Tips and Strategies

Guest post by: Stan Prokop

Article Overview: The articles reviews Canadian equipment financing as a key strategy for Canadian business owners, with a focus on ensuring the lease maximizes the unique benefits sought by your company .

Canadian Lease Financing -Tips and Strategies

Canadian business owners and financial managers continue to view lease equipment financing as a solid alternative for equipment and asset acquisition in Canada. Leasing and equipment financing have been key to Canadian business for well over 60 years, if not longer. It is simply the method of acquiring assets and paying for those assets over a period of time - A current popular 'buzzword' on leasing is 'profiting through use of equipment '. As a general rule most business owners would like to use assets, not necessarily own them. That brings us to one last buzzword, which is 'if it appreciates buy it, if it depreciates, lease it!

When we meet with business owners they often ask us for strategies and 'how to 'with respect to financing their assets. If the vendor or manufacturer you are working with does NOT offer financing then your job is to simply focus on obtaining the best price and delivery date for the asset you are acquiring. We referenced above the manufacturer not offering financing - We categorically encourage any company to take advantage of vendor financing or manufacturer financing that is available, if it is available! Why is that? Manufacturers and vendors either set up captive finance companies, or work with others to implement financing of their products for some very specific reasons. Primarily the reason is that companies do not wish to lose sales and profits by not offering a financing option. Also, when you lease through a manufacturer you are in effect under their control for a number of years with respect to their ability to offer service, upgrades, maintenance, etc. So the bottom line is that if you can take advantage of manufacturer financing, you should!

One of the only reasons you might not be able to take advantage of manufacturer financing is that your firm does not meet the financial and credit criteria of the vendor. In that case you simply need to work with a trusted, credible and experienced leasing advisor who can source the appropriate financing for the asset with a rate, term and structure that approximates your credit quality. In general we advise customers that when a vendor or manufacturer has a financing offering the credit criteria to qualify in general is quite high.

Because leasing in Canada has the potential to be viewed as complex we try and approach working with customer in a very consultative manner.

Why can Leasing in Canada be viewed as Complex? We are of the opinion that if a lease transaction is a good transaction it creates a win win environment for both your firm and the lease company. To do that various aspects of business need to be tabled - those aspects are:

Taxes

Accounting

Credit

Rate/Term/ and Structure of the lease itself

When your firm has properly addressed all of these issues at least in a very basic manner your business will have created a proper lease transaction. When all of the above issues are addressed then your firm is in a position to benefit from a lease financing scenario. The benefits of leasing are generally well known - they are:

Flexible and lower monthly payments -in cases where you utilize an operating lease these payments would be significantly lower than a term loan

Ability to upgrade and return equipment

Maintenance and service are many times included in a lease financing

Little or no cash down payment

Discussing these issues with out customers usually brings out the clear fact that not all the benefits of leasing in general apply to every firm. Quite frankly some are more important than others to each Canadian business.

In summary, when contemplating Canadian Equipment Financing work with an experienced , trusted, and credible lease advisor - Determine what your financing needs are and focus in on which benefits you need to maximize to make your financing work to optimal advantage . And then, as we said, you will 'Profit through use, not ownership'!

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Article Tags: Candian equipment financing, lease financing Canada



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