Equipment Financing Canada 7 Park Avenue Financial

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Clients always ask what they need to know or to provide in order to obtain solid lease financing for their Equipment Financing approvals in Canada. The entire lease financing process works best when you view it in a positive manner – it’s very much a consultative process with your leasing partner or leasing advisor. Because lease financing in Canada is such a broad industry representing the needs of all equipment acquisition financing in the country we strongly recommend to clients that they utilize the services of a trusted and credible advisor in this area.

Equipment Financing in Canada requires input from yourself in the following areas – credit, lease structuring, accounting, and of course the type of lease you wish to enter into.  The majority of businesses in Canada, small and large, utilize lease financing for their equipment and capital expenditure financing needs.

In order to position your company properly you should be prepared to share the following information:

-Who is the Lessee? Depending on the size of the transaction you will be required to provide financial disclosure. Many leases in Canada under, say, $50,000.00 can actually be approved without financial statement disclosure. Approvals are often done automatically in a day or so, sometimes in hours, based on your firm's rating and payment experience in Credit Bureaus and Dun and Bradstreet databases. We would point out that if rate and payment are very important to yourself you might want to consider disclosing financial results even if they weren’t required, as that can sometimes get you a better rate.  Naturally the other basic information required is similar to any type of business financing application – i.e. who owns your firm, what vendor are you buying the equipment from, etc.

• Equipment – Clearly you want to position the asset you are acquiring as useful assets that will help you generate revenue and profits. A ‘buzz word‘ in leasing is often ‘profits through use, not ownership’, and that’s a great thing to remember. Many leasing companies will validate that the equipment you are acquiring is from a valid vendor or manufacturer. Private sales from third parties are more difficult to finance – although we can also point out here that equipment financing in Canada often covers used equipment, as it is 100% financeable if the equipment has value and has been properly maintained, etc. On larger transactions an appraisal might be required.

• Delivery & Installation - it is critical for you and the lessor to ensure you have a solid understanding of delivery dates and acceptance terms. In many cases your vendor can be paid in advance if they are out of the country, etc. However, actual payments on your lease will of course only begin when you have received the equipment, and it has been accepted as functional, etc.

• Lease structure: Clearly this is one of the most important aspects of equipment financing and leasing in Canada. At its very basic you simply need to know the type of lease you are entering into and what the overall rates and structure and terms are. We can categorically say that this is probably where most of your time and outside expertise should be spent. Leasing is a relatively simple process to complete, but you acquired knowledge of the types of leases available, who is offering them, what the rates are, and how your overall credit quality is positioned are key aspects of lease financing in Canada.

In summary, knowledge of leasing basics is a powerful asset for Canadian business owners and financial managers.  Thousands of Canadian firms utilize lease financing for a variety of benefits, some of which might be more important to you than others.  Investigate the benefits of lease financing and spend the required amount of time to ensure you receive the proper approval, rate, term, and structure for your equipment needs!

Stan Prokop