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What Should Canadian Business Owners look for in a Lease Financing Proposal from their Lease Co / Lessor?

Guest post by: Stan Prokop

Article Overview: The article reviews keys aspects around equipment lease financing offers for Canadian business owners that allow the business owner to maximize rates, terms and structures to the firms advantage .

What Should Canadian Business Owners look for in a Lease Financing Proposal from their Lease Co / Lessor?

Canadian business owners and financial managers need to know the basics of lease offers and documentation required for their transaction. As boring as it may seem the lease offer and documentation is a critical part of any leasing transaction. Good documentation and clear offers ensure a solid transaction on behalf of your firm.

As a business owner you want to ensure that the lease financing offer confirms and promises your negotiation. Clearly this becomes more important as your transaction gets larger in dollar value size and importance to your firm. As a business owner you want to know what happens 'if '...!

It makes common sense that lease financing offers and their documentation vary based on the size of the transaction. Complexity comes with size, and that makes sense in any aspect of business.

In Canada there is a very vibrant 'small ticket 'industry. This covers your firms lease financing and equipment financing needs in the $ 50,000 and sometimes up to 100,000.00 ranges. The industry is driven by quick approvals, clear term sheets or offers to finance, and simple, often one page leases. Your firm gets orders the equipment, the lessors pays the vendor, you sign the lease document and accept the equipment - End of story. Could it be simpler - Not really?

As your asset acquisition grows in dollar size, approaching $ 100,000.00 + the paperwork clearly is a bit more complex. Normally you enter into a Master Lease arrangement with the lender; it is highly advisable that your lawyer look over the documentation, and most importantly, that you or your lawyer review the terms of the master lease.

Readers surely understand by now that if your transaction is in excess of One Million dollars that your lawyer participation is probably clearly required!

So what is all the documentation that we have referred to about? At the essence it's about three things - your firm, the lender (we will call them the lessor), and your supplier or vendor on the equipment.

Lease offers usually come in letter form after you have negotiated with the firm's representative. Many Canadian firms employ the use of third party intermediaries who have high specialized leasing and industry experience - similar to your insurance or mortgage broker they have only one job - to achieve the best rate, terms, and structures on your asset financing . Let's use a quick example - let's say you are acquiring an asset in the 750,000.00 range and the vendor quotes you a rate of 9.5% - you require a 5 year term for the lease. Your monthly payment is $ 15,627.00. If a respected financial lease intermediary can negotiate a rate on your transaction of 8.00% your monthly payment is $15106.00 - Over a 60 month term of the transaction your firm has just ' saved ' $ 31,260$ over the term of the lease !! Is it just us, but could that savings go towards extra headcount or other growth possibilities in your company - we think so!

In a future article we will cover off additional aspects of lease offers, approvals, and documentation, with a focus on saving the Canadian business owner time and money.

We have shown that acquiring assets and lease financing those assets varies relative to the size and complexity of your transaction. Business owners can significantly benefit from the use of a trusted advisor to their firm (lawyer/accountant) or a third party and credible lease financing expert.

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Article Tags: canadian business, Canadian lease financing, equipment leasing Canada



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