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Secrets To obtaining best lease finance rates for equipment leasing in Canada

Guest post by: Stan Prokop

Article Overview: Winning the lease pricing battle in Canadian lease finance ! Information on key issues that affect how a firm can achieve best lease finance rates for equipment leasing finance transactions in Canada . Which factors affect your optimal rate, term, and structure .

Secrets To obtaining best lease finance rates for equipment leasing in Canada

Do you think there is a big difference in approval success in equipment leasing finance and lease finance rates among different companies? We sure think there are and we're going to show you how to master the information that will allow your firm to achieve equipment finance success.

Most business owners and financial managers in Canada who acquire equipment realize there are much touted significant benefits to equipment leasing. When business owners approach asset acquisition they do it in the view of trying to determine if they should ' lease' or ' buy' the asset in question. The decision often focuses on two issue, is it less or more costly to lease, and finally what are the cash flow advantages to utilizing this type of financing.

Achieving the best lease finance rates comes down to a couple key issues - the overall credit quality of your firm, and more importantly, how you present that credit quality to the lessor. Secondly structuring of your transaction, hopefully with your input. Significantly affects your lease rate. For example a larger down payment will of course drive your overall rate down considerably - i.e. you are financing less.

More often than not a simply first and last payment is all that is required as a sort of down payment or security deposit on your transaction. Other key points that will enhance your equipment lease rates is the importance your place on items such as the ability to return the equipment to the lessor at the end of the term.

How does returning the equipment at the end of term to the lessor become a ' secret ' of great lease finance rates? It's simple, your decision to return the equipment at end of term typically allows you to opt for what is known as an operating lease - as such the lessor makes a bet on the ability to sell or remarket or release the equipment to another party. That type of transaction typically drives the overall lease rate down significantly.

Most business owners are incredulous that in some cases you could actually achieve a ' negative 'lease rate on your transaction! How's that for a great inside tip or secret on equipment lease financing !In the transaction we just detailed it is possible that all your payment don't even add up to the original purchase price of the equipment or asset - due, as we said , to the lessors belief they will get the equipment back . And you should be very happy to let them take that bet and risk, because that becomes the lessor's problem, not yours, you simply benefit from the great lease finance rates on your transaction.

Another more obvious benefit of equipment lease financing is that it's available to all firms, including start ups and firms that might be financially challenged; therefore lease finance rates you achieve are often considerably better than other forms of finance, such as bank term loans, etc.

In many equipment finance transactions the ability of the owner to provide a strong personal guarantee can often enhance the overall pricing of your transaction in your favor, although we acknowledge of course that most business owners would prefer to avoid, not offer up such guarantees.

In summary, it's important to understand how lessors price your transaction, meaning what factors are important to them to create a satisfactory return. Being armed with the ability to properly present your firms overall credit quality, as well as focusing on benefits that are important to your firm that affect lease finance rates is what successful equipment leasing finance is all about.

Speak to a trusted, credible and experienced Canadian business financing advisor to guarantee you will receive the best rates, terms and structures, potentially saving you thousands of dollars on any acquisition via asset finance.

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Article Tags: equipment leasing finance, lease finance rates



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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.
Leasing advantages/ disadvantages - Nana compiled a great list and as you can see, there are more advantages than disadvantages when weighing this as an option. Also- I'd like to address one of those disadvantages- the one where you have to pay one or a few payments first. while it's true that most leasing companies will only have you put down one or two months in advance to get the lease and equipment. But when you compare this to the cost of a loan down payment (when including equipment to purchase within your business loan) or the cost of purchasing outright, you really come out ahead with the lease, which leaves more money to improve your cash flow. Your business loan size would be smaller, which ultimately makes your loan down payment smaller so it's a win-win for you! Also- if you are dealing with the right equipment company, they can include additional soft costs in your lease, such as training, maintenance & installation costs. Kevin- that is a perfect example of how one can benefit from up-to-date equipment when leasing.
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Brokering Equipment Leases - We were thinking of brokering our own leases for the software that we sell, and perhaps other equipment that chiropractors need, but we've had a hard time finding what seems like legitimate companies to work with on this. Does anyone know anything about equipment leasing brokering and could hook us up with a reputable group that would have access to lenders for this purpose?


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