Tweet

How can my Canadian Company Sell or Remarket Equipment that was on an Equipment Lease and is no longer needed?

Guest post by: Stan Prokop

Article Overview: The article focuses on the challenge of disposing of leased assets at end of term and identifies certain industry practises in that area

How can my Canadian Company Sell or Remarket Equipment that was on an Equipment Lease and is no longer needed?

Lease financing continues to be one of the major methods of equipment acquisition in the Canadian business environment. Business owners and financial managers of Canadian firms often with to replace older equipment with newer technology, and that can be of course anything from shop floor equipment to computers.

So what does the business owner do with equipment that he currently owns that was on a lease that has come to end of term? That equipment needs to be disposed of in an efficient and economic matter.

As a business owner you want to dispose of the equipment in a method that gives you the highest price while at the same time minimizing your expenses around that entire process. Back at the leasing company this entire process has an industry term, generally known as 'remarketing '.

In order to begin the process you need to look at a couple ' big picture ' scenarios - namely what do you currently believe the equipment is worth, and is there any sort of demand out in the market place for the equipment . If there is some solid sense that the situation can be advantageous in value to your firm ( we wouldn't recommend remarketing 1990 DOS based PC's..!) you need to asses what sort of costs will be involved and who in your firm will be primarily responsible for the divestiture .

So what's one of those 'bottom lines'? It is of course, what is the asset worth, and how do I determine that. Many industry publications for the asset type might provide you with a 'black book 'residual value on the equipment - that is similar to the 'black book 'we hear about at a car dealer's lot. Clearly this sort of number is only a guideline, as a lot of factors now come into play, like technology obsolescence (think computers!) as well as maintenance if in fact maintenance was applicable.

When you are looking at a disposition number that is reasonable you are in fact looking at three different numbers. Let's clarify that comment. You are looking for a number that matches the three industry terms -

FMV

OLV

FLV

Confused?? It's not that bad really. FMV stands for fair market value, and is a broad term which simply says that is it the price that a reasonable buyer will pay with no time constraints and some good market activity. It's quite comparable to selling your house and determining with the realtor what the current market will bear.

OLV is Orderly Liquidation value, and is essentially the auction process that might be held by you, an appraiser, or an auctioneer. The asset is put up for sale, and given current market conditions, is sold at highest bid.

FLV is forced liquidation value, and that is , from your perspective, kind of the ugly number - the asset has to be sold, it has to be sold tomorrow, who will give me what for it immediately, etc!

So the bottom line is we like FMV, we don't like FLV as the current asset owners.

Again, using our house analogy as an example you need to do some research into recent sales, that is of course because it gives you a ' comparable '. Your market research should come from both vendors and manufacturers and resellers of that type of asset.

In summary, disposing of a major off lease asset is a defined process. Care needs to be given to current market conditions and several industry terms revolving around the potential type of sale you will ultimately agree to. Successful completion of this whole process will allow you hopefully to enter into a new Equipment Lease financing transaction for assets to help your firm's growth and profits!

Related Articles
  How To Obtain funding and best lease rates for Canadian Equipment Financing Needs
  The Difference Between A Capital Lease and An Operating Lease
  What is an Operating Lease and who uses them?
  How Financing Options In The Canadian Equipment Leasing Industry Can Benefit or Harm Your Overall Profitability When You Lease Equipment !
  Secrets To obtaining best lease finance rates for equipment leasing in Canada
  Essential Information For Equipment Leasing And Finance
  Equipment Financing Specialist – Canadian Leasing Solutions
  Equipment Financing Canada – One Big Mistake Not to Make
  Canadian Do It Yourself Equipment Lease And Loan Advice – Commercial Business Financing
  Lease Financing and Equipment Financing in Canada - Your reasons to consider
  Lease Equipment
  Canadian Lease Financing - Maximizing the Benefits!
  Equipment Financing – Toronto Area
  What happens to Canadian Equipment Financing Assets at the end of my firms Equipment Lease?
  Lease Financing Canada – Canadian Asset Financing Solutions
  Canadian Leasing - Your best equipment financing option!
  Equipment Capital – Financing Options you didn’t know you had
  Heavy Equipment Financing – Used / New Lease Options
  Which Of The 3 Equipment Lease Rates Would You Choose ? Canadian Capital & Operating Lease Payments Explained!
  Delve Into Canadian Sale and Lease Back Financing – Benefits Of This Type Of Leasing Of Equipment

Article Tags: assets, equipment financing, equipment lease, remarket, remarketing equipment



Related Forum Posts
Equipment leasing - Equipment leasing has many benefits, such as tax benefits, conserving money and always having up to date equipment to stay competative to name a few. Obviously, it's partially dependent upon what type of business you have as to whether you will benefit more than someone else but... Do you think it's worth leasing your equipment rather than purchasing it? Can you think of any other reasons you can benefit from it or any reasons this is not a good idea?
Re: Expanding to the US? - We are an active Canadian Company that wants to expand into the US. Is the best approach to division with another company? Yes, we have a few companies in mind that we have been in contact with in the US. But we want to consider all our options first. How do we do it on our own? Example> Stantec is whole wide, how did they do it? Coke Cola sells world wide. We are looking for any information to help get us started or point us in the right direction. Whether it's a great book or a website to check out. How do we share a great Canadian company with the US market? Thank you for all your ideas.
Small Business Seminar Presenters Required Across Canada - In March 2007 BizLaunch we will start presenting small business seminars across Canada. I am in the process of recruiting experienced business owners with good presentation skills and a passion for small business to present these seminars. 1. The seminars will be 90 minutes long 2. The seminars will start at 6.30pm 3. The seminars will be held in convenient locations 4. The subjects will include business planning, marketing, sales, website marketing, taxes etc. 5. The audience will be new business owners(0 - 5 years) 6. The presenters will be supplied with the presentation slides required 7. The seminars will be free to small business owners attending 8. Presenters will be evaluated on their presentation by the audience 9. Equipment will be supplied by BizLaunch 10. Presenters will be compensated for the presentations $250 per seminar 11. Seminar marketing will be done by BizLaunch and its partners 12. These seminars will be a great addition to what is already being offered to small business If you're interested send me one page about yourself and why I should use you to andrew@bizlaunch.ca
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
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


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

In the Year 2020 . . . Process

Get Your Business on Google Places

Death by Micromanagement

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.