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How To Obtain funding and best lease rates for Canadian Equipment Financing Needs

Guest post by: Stan Prokop

Article Overview: Information on how to get the best lease rates for asset acquisition needs . What are the criteria for equipment funding transactions and how can you maximize Canadian equipment financing benefits .

How To Obtain funding and best lease rates for Canadian Equipment Financing Needs

Getting the best Canadian equipment financing business funding and lease rates isn't as difficult as you might think if you're well informed. Canadian business has always regarded business equipment financing as a solid choice for asset acquisition.

When you consider an asset finance decision your alternative usually tends to be a bank loan. Banks obviously have the best financing rates in Canada but did you know that the banks themselves don't offer equipment leasing. A few have specialized subsidiaries that do offer this type of financing, but in general you need to know that if you are focusing on a great rate for equipment financing via a bank you're talking about a ' loan ', not a lease - and boy is there a difference .

In Canada a huge equipment lease industry exists, made up of literally tens of players who are small, large, Canadian, U.S., captive to their mfg parent, etc, and on it goes. We're going to help you demystify who's who and how you can focus on getting, in your terminology, ' a great deal '. And a deal that's approved!

So what are the secrets to getting the best lease rates for your financing? You need to know how the lender thinks, and he or she is thinking about 2 things - they are cash flow and debt burden.

So when you approach a lease company you should have spent time to demonstrate in advance that you can pay for the equipment. This can be done via a historical cash flow analysis, or by the preparation of a go forward cash flow analysis for the next year or so. You are probably doing that anyway for your regular business planning. It has never escaped our amazement that lease companies analyze your old cash flow to see if you can meet their ongoing cash flow requirements a la your ability to make payments, but we'll leave that for another day.

Want another great tip? It's simply that Canadian equipment financing focuses on whether the asset you are buying is productive and will assist you to grow sales and profits, so be prepared to articulate that in some manner.

Most Canadian business owners already know the key advantages of leasing: allow you to acquire assets you need that you might normally not be able to afford otherwise, payment and term of lease flexibility, tax benefits, risk of ownership staying with your lessor, and finally great flexibility at the end of a lease to return, purchase, upgrade, or extend.

Getting back to best lease rates themselves we encourage all our clients investigate operating leases, especially when they are acquiring technology - this type of lease will drive your rate down dramatically, because the lessor assumes a hefty residual value based on your desire to return the equipment at the end of the lease - they then remarket the asset. Speak to a Canadian business financing lease expert to determine the true benefits of an operating lease.

Great lease rates also come with faster approvals in Canadian equipment financing - so on a normal transaction you should assume you will have a solid answer back on rate, term, structure, and credit approval in a matter of days. Naturally, as we have stated you should be positioning your case properly, focusing on ability to repay, providing a proper invoice or equipment description, and ensuring your financials are up to date.

Lease funding in Canada comes from, as we mentioned a number of players, some are small, many are large corporations, some are foreign owned, and some only do certain types of deal sizes and assets. Want to demystify that maze - Speak to a trusted credible and experience Canadian business funding advisor who can help you get the equipment funding you need at lease rates your transaction deserves.

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Article Tags: asset acquisition, Canadian equipment financing, funding, lease rates



Related Forum Posts
Re: How's the Canada SBLA lending market doing? - this study found that yields on capital leases were usually higher , sometimes considerably higher , than the interest rates , even with fees added , that rates banks typically charge SME borrowers. more specifically , the SBLA requires that bank lenders charge interest at a maximum rate of 3.0 percent above prime. however , yields on leases vary from 1.9 to 6.9 percent above going prime rate. The amounts of lease financing are consistent with the terms of the SBLA: * the average principal amount being lease financed is less than $250,000; * capital amounts are usually for less than $100,000.................
Lease out the Building - I would just lease out the building, as you could charge higher rates with the Wal-Mart across the road. You have much less stress then, and then you would if you had to run your own business as well.
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: Selling my business.... - I think you're right about the lease Russ - unless there is an option to sublet in your current lease, it seems unlikely that the owner would be forced to renew the lease for a new person. Each landlord has the right to screen and refuse any unqualified tenant. Why not consider hiring someone to work or manager the store and get a change for yourself for at least a time or bring in a partner to share the work load and responsibilities. Shri


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