Asset Finance In Canada : The Not So Secret Continuing Rise Of Equipment Lease Financing

Asset finance decisions don't always come easy for the Canadian business owner / financial manager. How then do equipment lease financing solutions allow your company to escape that ' being held ransom' feeling when it comes to getting the equipment and technologies you require to run and grow your business? Let's dig in.

It shouldn’t be a secret that asset leasing strategies have been around for centuries in Canada. While some forms of business financing have either become outmoded or simply don't really work well anymore leasing assets continues to offer the same benefits it always has, and makes sense all the way along.

What are some of the key advantages then if your choose to lease assets? There are other ways to finance those same assets, the most common being term loans, bank debt, etc. Business owners therefore have options, but experts tell us that close to 80% of all businesses gravitate towards leasing simply because it's one other external source of business credit.

And, effectively structured it allows your company to access the capital it needs typically on a 100% financing basis. To be fair, many asset leases do require a first payment in advance, or a down payment, but once you're past that your purchase is simply fully financed.

A prime concept here is also the fact that equipt. finance allows you to match the benefits of the asset or assets you are financing to cash outflows over that same period of time. And if the asset in question is an operating asset that helps your company generate revenue all the better giving that matching of cash outflows. We could call this ' self funding' as the asset pays for itself over the period of the term of the lease.

While we are talking about paying a lot of attention at the start of your asset financing journey it makes as much sense to consider what the industry calls ' end of term options’. Simply speaking many assets still have a residual value of use and properly structured you can take advantage of that value by arranging a lease that takes that estimated final value into consideration.

Business owners/managers spend a lot of time chasing capital these days. Equipment lease financing approvals are much easier to obtain compare to bank financing which often revolves around annual bank reviews, heavier credit diligence, etc. While most Canadian banks now offer leasing as an additional service it’s important to remember they do that in the context of their entire relationship with yourself.

The bottom line - once your company is approved for a lease and you're making your payments on time no changes are going to be made to your deal. That allows you to source your working capital and other debt financing needs from other lenders or institutions. The prime collateral of the leasing solution is simply the assets under that lease, and typically no other collateral is required.

Many manufacturers of the assets you require to run your business over captive or specially tailored programs to enhance their sales. Take advantage of them because no one is more incented to help you finance your needs than the vendor itself.

While we are primarily talking about ' ease of acquisition' for assets your business needs you'll find there are a number of tax and accounting benefits to asset leasing.

If you want to escape the feeling of limited options and that desire to not be held ransom in your asset financing needs seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record or success in equipment lease financing.


Stan Prokop is the founder of 7 Park Avenue Financial . The firm specializes in business financing for Canadian companies     in the areas of working capital , asset based lending, SR & ED tax credit financing, equipment financing,  franchise financing and banking .


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