Tweet

Financing Equipment For Your Business? Canadian Leasing Options Demystified !

Guest post by: Stan Prokop

Article Overview: Information on financing equipment in Canada. Which leasing option is best for your business. Examining Finance alternatives for Canadian business owners who are acquiring assets.

Financing Equipment For Your Business? Canadian Leasing Options Demystified !

Acquiring assets for your business, from plant equipment to the latest computing technology provides Canadian business owners and financial managers with growth and profit potential. But how much time do you spend on assessing the right business leasing options when financing equipment.



Let's examine the strengths, benefits, and yes, sometime drawbacks on your lease financing options.



We're of course assuming that you conquered the lease vs. buy decision and focused on leasing business assets for the obvious reasons we've discussed in the past: monthly payment flexibility, accessing business credit outside your established bank and other facilities, and using tax and accounting scenarios to your business advantage.



So that puts you there, at the fork in the road so to speak. Namely which type of business financing equipment lease works best, for you. It's actually not a large choice... it comes down to a capital lease or an operating lease. Understanding the make up of those two transactions makes you a winner when it comes to choosing which option works best for your firm.



Let's examine Capital Lease structures... and benefits. Prior to choosing a capital lease option you have a general sense that you wish to own the asset at the end of the lease term. The capital lease, aka ' lease to own ‘effectively transfers ownership to you at the end of the lease term. Hopefully you have picked the right term on your lease, matching use of the asset to a proper amortization. In Canada that typically is 2-5 years, sometimes longer depending on the asset type.



From an accounting perspective, since you have elected the lease to own strategy via a capital lease you are no win a position to both depreciate the asset as well as record it as an asset on your balance sheet. The equipment financing industry in Canada considers full payment of the rentals, i.e. the monthly payment as the full recovery of their cost plus profit, i.e. the interest rate on your lease.



As an aside clients are always asking us about rates on business equipment leasing. Rates vary widely in Canada. How widely? Anywhere from 5 - 25% per annum and boy is that a range. Clients are astounded when we advise them they get to pick their own rate! How can that be possible? Simply because your over all credit quality and the dollar size and type of asset dictates lease pricing. You have got to simply demonstrate that credit quality or address any concerns of the lessor.



But wait... didn’t we say there were two options for financing equipment. The other option is the FMV option, known as the operating lease. Payments will always be lower than a capital lease option, simply for one reason. That’s because the operating lease scenario assumes the opposite of ownership, and that’s ' use '. You want to use an asset, not acquire the responsibility, and risk, of ownership. The good news is that if it turns out you wish to purchase the asset that a properly constructed FMV lease will allow you to still exercise that right, at a fair price.



Confused about the right business leasing options available in Canada? Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in freeing up working capital and maximizing tax and accounting treatments for business asset finance in Canada.

Related Articles
  Canadian Leasing - Your best equipment financing option!
  The Evolution of Equipment Financing and Leasing in Canada - an Overview
  Considering Canadian equipment leasing ? What Leasing Companies Offer The Best Equipment financing
  Guaranteed Powerful Equipment Leasing Tips For Canadian Companies Financing Large and Small Assets
  How Financing Options In The Canadian Equipment Leasing Industry Can Benefit or Harm Your Overall Profitability When You Lease Equipment !
  Equipment Financing Specialist – Canadian Leasing Solutions
  Equipment Leasing
  Secrets of Dealing With Equipment Leasing Financing Companies
  Canadian Leasing - Financing Solutions that work
  Is a Leasing Company Your Best Choice For Business Equipment Financing – Choose Business Leasing That Makes Sense !
  Lease Equipment Financing – Canadian Solutions
  Lease Financing - Canada business financing
  How To Work With The Best Canadian Leasing Companies In Business Financing and Financial Services ?
  Equipment Financing - Capital Leasing Options That Make Sense
  Why Leasing and Equipment Financing are more important than ever in the Canadian economy
  Reasons for Leasing for Business - Why Equipment Financing Works!
  An Unequaled Equipment Leasing & Commercial Financing Option - Your Best Canadian Deal
  Medical Equipment Leasing Canada
  Equipment Financing in Canada – 2010 – Optimism for your Business Financing Prospects !
  What Are the Changing Trends in the Canadian Lease Financing Industry?

Article Tags: business, financing equipment, leasing



Related Forum Posts
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Canadian Entrepreneurs...let's chat.... - I thought it would be nice to gather up all the Canadian entrepreneurs on one topic to discuss how everyone is getting along. I just realized Evan is Canadian as well! Hope he's able to join the conversation. Look forward to the chat. By the way, I'm in BC. Phil
Simple poll for the group. - On personal opinions only, what company represents Futures Options and why? I thank you, before hand for your interest and feedback...
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Re: Meltdown in the Financial Markets - [quote="Kevin":3lnvm7h2]If the US is simply creating fake/"funny" money with their bailout, then I wonder why the Canadian dollar has dropped so badly? One Canadian dollar is suddenly worth only about $0.84 US now. It doesn't make sense to me.[/quote:3lnvm7h2] The Canadian dollar has dropped to about $0.80 USD... what kind of holiday shopping season will it be this year if this trend continues?


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

RULE YOUR BUSINESS LIKE A SHINE STAR

What Is The Foundation for Your Vision?

SEO and the Entrepreneur

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.