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Lease Financing in Canada - Why is it a solid Financing Alternative ?

Guest post by: Stan Prokop

Article Overview: The article focuses why Canadian financial managers and business owners should investigage lease financing as a solid alternative strategy for capital expenditure financing

Lease Financing in Canada - Why is it a solid Financing Alternative ?

Financial Managers and business owenrs in Canda continuously find they are competing in a difficult and challenging economic environment. Equipment Financing and Capital expenditure issues are top of mind when Canadian firms are looking to grow and prosper. Revenue generating assets are important to any business.

When large corporations report their financial the analysts out there focus on Free Cash Flow. This is the cash flow that is left after a company totals their net income and depreciations and subtracts what they have spent on 'capex', or capital expenditures.

That free cash flow is of course what's left to pay shareholders and run the business. But small and medium size firms have a huge challenge in generating free cash flow per our formula above. They more often than not don't have the luxury of paying cash for much need new and revenue producing assets.

That is why Canadian firms should be looking at Lease financing as an essential asset acquisition and cash flow tool. Let's do a quick recap on the major benefits of lease financing:

• CASH FLOW - Canadian businesses can conserve working capital and invest those funds instead in receivables and inventory for additional growth - Also firms want to achieve the benefits of these newly acquired assets over time without having to pay for them all at once on day one
  
  TAX BENEFITS - Lease payments of course can be expensed and are generally more advantageous from an accounting viewpoint than a loan
  
  BETTER ASSET MANAGEMENT - Every firm wants to stay 'leading edge 'on asset acquisition, with respect to items such as computers or plant assets. At the end of the term of the lease the Canadian business owner or financial manager has a number of options available with respect to asset disposition
  
  OFF BALANCE SHEET FINANCING - Depending on the final structure of the lease a transaction can be recorded off your balance sheet - you are in effect using the equipment, gaining the benefits, but not owning the equipment. Those are some of the more 'technical 'reasons for lease financing in Canada. Do the overall benefits of this financing alternative end there? They don't! On balance the lease financing process is one of the simpler and easy ways to acquire assets - it also requires not large cash outlay, and your bank lines stay intact. Canadian business owners have huge challenges in maintaining bank lines that are adequate for their business - leasing alleviates part of that challenge.
  
  What can be financing - the better questions are of course a shorter answer - what can't be financed. Almost any asset can be financing in Canada if its core to your business needs - That includes of course technology, vehicles, machinery, production equipment, tooling, telecom assets, agricultural assets, and construction assets. Again, to be clear, if it's a hard asset it can be considered for lease financing!
  
  As business owners in Canada we want the right equipment at the right time in order to stay competitive and profitable.
  
  Is leasing the only financing alternative available to the Canadian business owner or financial manager - definitely not. Should it be understood and considered? Definitely so!
  
  

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Article Tags: capital expenditure, equipment financing Canada, Leasing in Canada



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grants for restaurants - Well friend I don’t have any idea about government grants for restaurants, but I will recommend that you may try on some banks who offer loans for small business where the government will have some guarantee. Beside that Restaurants business is very risky so some of banks who gave some Financing Loans they will look at on it if there is enough solid business plans.
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).
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Re: Kevin's Case Study #8 - How do you attract a finance expert? - I think the best way to find any reputable accountant would be by recommendation. If you cannot get one by recommendation then you should put those you narrow down your search to through an in depth prescreening process. Check the out their firm with BBB and make sure they are licensed & registered. Always check credentials and make sure they graduated from the schools they claim to have attended. Financing should be found in accordance to the type of financing you need and the type of business you are financing. You should always get prequalified before commiting to an application. You should seek out those financial institutions that specialize in the type of financing you are seeking and then check to enure they can finance your type of business.


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