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Equipment and Lease Financing Considerations for Canadian Government Entities

Written by: Stan Prokop

Article Overview: The article provides insight into why certain Canadian government entities utilize a lease financing strategy , including benefits as such .

Equipment and Lease Financing Considerations for Canadian Government Entities

In a previous article we discussed why some Canadian government entities such as municipal, provincial and federal departments choose lease financing as an alternative financing consideration. Two of the key areas we addressed were the fact the lease financing provided obsolescence protection for assets these government agencies contemplated acquiring, and also the fact that many government entities face budgetary restraints, which are often solved by lease financing practices.

There are other factors which assist, via lease financing, government bodies in acquiring assets. Let's discuss some of those.

We view government agencies, rightly or wrongly, as being bureaucratic. Users in those entities require assets such as computers, machinery, vehicles, etc to run various phases of government. Many department heads in government realize there is a significant approval and authority matrix in place when acquiring an asset on behalf of government. Leasing has the ability to remove a lot of that bureaucracy because department managers and department heads can authorize monthly lease payments and rentals out of their operating budgets, as these amounts fall nicely within their own spending authority.

Another key area for discussion is the overall concept of cash management within government departments. Like the private sector government wants to ensure it is using up to date assets and technology (best example = computers). As newer technologies are often more expensive it is an easier path for a government entity to use a lease strategy for acquisition. It's that bottom line of buying more and spending less or the same ( monthly ) Most government entities qualify of course for 100% financing , down payments aren't necessarily required as they might be for industrial corporations . Also miscellaneous costs such as delivery, maintenance, and installation are staples of a properly structured lease transaction. Naturally money saving on lease financing and minimal cash outlay allows government departments to allocate much needed funds to other areas within their concern. Everyday we read about how budgets are stretched and maxed at every level of government.

Let's discuss one final additional benefit of lease financing to these government entities - and that is simply the ability to forecast cash outlays better. Lease payments tend to be fixed (they can be variable) and fixing an interest rate and payment allows a government entity to more accurately forecast cash flows in the government budget process At the end of lease terms users have lease options with respect to keeping, returning, or disposing of the equipment - This can be precisely calculated when it needs to be, again re - enforcing a government entities ability to plan and budget properly.

In summary, we have looked at some additional reasons why government sectors consider lease financing, primarily around the decision making process, cash management, and cash forecasting. Anything that makes a government department run more efficiently and smoothly is probably a good thing!

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  Canadian Lease Financing - Maximizing the Benefits!
  Equipment Financing Specialist – Canadian Leasing Solutions
  Equipment Financing in Canada – 2010 – Optimism for your Business Financing Prospects !
  Do Canadian Banks provide Equipment Loans and Lease Financing?

Article Tags: equipment financing, government sector, lease financing



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