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Canadian Leasing - Your best equipment financing option!

Guest post by: Stan Prokop

Article Overview: The article highlights basic financial fundamental reasons why Canadian business owners and financial managers choose lease financing as a great financial strategy for new equpment, technology, etc .

Canadian Leasing - Your best equipment financing option!

Canadian Leasing - Why do thousands of firms of all size in Canada continue to come back to this great method of financing their equipment, capital expenditures, etc? One of those reasons is simply that they need the equipment for increased growth and profits, and to remain competitive in their industry.

Acquiring new equipment has a cost attached to it of course. Those capital budgets, whether your firm is large or small, can be a huge drain on your cash flow and working capital needs - cash flow and working capital that you would prefer to have on a daily basis.

Every firm has different reasons for Leasing in Canada. The bottom line more often than not is that new equipment will help your firm in becoming more efficient. These days a major focus is on ' green ' and a significant amount of new equipment purchases have aspects of the asset that are more environmentally friendly . As a simply example new computers are more and more using less energy, we would point out that this saves on the hydro bill also!

For businesses that are in a competitive environment the focus is always on staying up to date with plant equipment, computers, software , etc ( By the way, software can be leased also!)

When our customer sit down with us and ask us for lease financing they probably , quite frankly, talk more about the financial benefits than those environmental benefits - They have budgets, cash flow challenges, and over all growth that requires working capital for receivables, inventory financing, etc . Leasing becomes the obvious 'affordable 'way to acquire this equipment, as it focuses on staying on budget.

Let's look at a quick example: Let's say your company needs an 80,000.00 piece of equipment for the manufacturing process. What are the options of the Canadian business owner and financial manager?

They are fairly obvious, so which one is best? The options are:

-Pay cash and reduce the company ' cash on hand ' on the balance sheet

-Draw down on the company line of credit

-Speak to your Canadian chartered bank about equipment loans

-Lease the equipment

When we sit down with customers and lay out those options for business financing equipment leasing very quickly, more often than note, becomes a winner. The answers seem obvious to the Canadian business owners - they don't wish to reduce cash, use operating lines for long term purchases, and bank negotiations around term loans and loan covenants and approval times don't seem to appealing . Lease financing becomes a very obvious first choice. The faster the new equipment arrives and proper lease financing put in place the faster you can continue to grow sales!

So in our example, if our customer accepted a 4 year capital lease his monthly payments would be, based on current competitive rates, approx $1940.00/ month.

The Canadian business owner or financial manager has just solved his capital outlay problem and you can too!

Call a trusted, credible, and experienced lease financing advisor and discover how those financing options can enhance your business!

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Article Tags: Canadian Leasing, equipment financing, financing option, lease financing



Related Forum Posts
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.
Tips for Securing Financing - Can someone suggest for securing financing for a Dome home? Curious if it would be better to keep the project modest and hopefully add on later, or should I Design big now? How well do lenders take to designs made with later expansion in mind? eg build two domes with one left as a garage but built so that it could later be turned into living space. I own the land which needs a zoning change but the Planning and zoning departments don't think I'll have any trouble, it will just take time (perhaps complete June 2006.) I hesitate to actually start anything (design) since too many changes of direction cause wasted effort time and money. If I can't get financing I will have to go really modest and will have very little available to design in planed expansion capabilities. I also don't want to bring in the heavy equipment for spraying and concrete more than
Collateral security required - You will have to use your home and anything else you own for collateral on a business loan. The SBA will require you have at least 2 years in the same industry as the business you want to open. Banks will want more money down (30%) and real property as collateral, and will probably charge higher rates and require a 5 year baloon. More and more credit unions are getting into commercial lending and tend to be a little more friendly than banks. Non-bank lenders can offer a nice alternative. They typically require less money down (10% in many cases), rates are usually variable (tied to prime like 2 to 3% above), are more willing to accept equipment as collateral, but expect a shorter term as a trade off for the risk (ie. 5 to 7 year term). This can make it difficult for some to afford the loan payment. Yet another option is a leasing company. There are many leasing companies that will finance franchise purchases and expansions by writing the whole thing up as an equipment lease. (200K) is not out of the question. They might require 10% down, but as long as they have a first position on all the business assets they are quite willing to set you up with a lease. The downside is that your cost of financing (the leasing co. won't call it interest) will be higher than any type of loan. When figuring you cost remember that many states require you to pay sales tax on the amount of your monthly lease payment. Also consider the buy out terms at the end of the lease period. You'll want to stay away from market value buy outs. Go for the $1 buy out. If you have enough equity in your home, you might be better off taking out a home equity loan and using that to finance your business.
Who's best for first time commercial loan? - You will have to use your home and anything else you own for collateral on a business loan. The SBA will require you have at least 2 years in the same industry as the business you want to open. Banks will want more money down (30%) and real property as collateral, and will probably charge higher rates and require a 5 year balloon. More and more credit unions are getting into commercial lending and tend to be a little more friendly than banks. Non-bank lenders can offer a nice alternative. They typically require less money down (10% in many cases), rates are usually variable (tied to prime like 2 to 3% above), are more willing to accept equipment as collateral, but expect a shorter term as a trade off for the risk (i.e. 5 to 7 year term). This can make it difficult for some to afford the loan payment. Yet another option is a leasing company. There are many leasing companies that will finance franchise purchases and expansions by writing the whole thing up as an equipment lease. (200K) Is not out of the question. They might require 10% down, but as long as they have a first position on all the business assets they are quite willing to set you up with a lease. The downside is that your cost of financing (the leasing co. won't call it interest) will be higher than any type of loan. When figuring you cost remember that many states require you to pay sales tax on the amount of your monthly lease payment. Also consider the buy out terms at the end of the lease period. You'll want to stay away from market value buyouts. Go for the $1 buy out. If you have enough equity in your home, you might be better off taking out a home equity loan and using that to finance your business. I hope this helps.
Re: Funding Question - Dianne, Depending on the bank that you're working with, be very, very careful about looking for financing for your marketing or advertising needs. Banks are not willing to finance these expenses in my experience and I was working with the BDC, which looks after government secured small business loans. Even with the lower risk for the BDC (As a large percentage of the loan is backed by the feds), they still required specifics and would not look at financing operating expenses or sales/marketing. [i:1unyjpe9](I noticed after that you're in the US... My experience deals with Canadian lenders so I'm not sure if the criteria is the same in the US market)[/i:1unyjpe9] To Smithwayne... If you're confident in what you're selling and have a sustainable market, don't be afraid of the recession. Look at restructuring your loan as a line of credit and use only what you need. Be very careful with your spending and don't throw money at unproven marketing... in other words, run a tight ship...


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