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Unlock  the Power of Asset Leasing: A Canadian Business Guide
Asset Leasing in Canada: The Alternative Path to Business Growth

 

YOUR COMPANY IS LOOKING FOR ASSET LEASING AND LEASING FINANCING IN CANADA! 

Understanding the Canadian Landscape of Asset Leasing and Financing

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leasing assets in canada and leasing financing solutions from 7 Park Avenue Financial

 

"Navigating Lease Financing in Canada: A Comprehensive Guide"

 

 

 

 

Introduction 

 

Canadian entrepreneurs and financial administrators increasingly use asset leasing and lease financing solutions.

 

This economic approach is fundamental in the ever-evolving Canadian business landscape. But how can one navigate through this complex terrain via leased assets, and where should the financing be sourced from? This article seeks to answer these critical questions, presenting an insightful guide for Canadian businesses looking for viable financing solutions.

 

What is the difference between financing and leasing an asset or technology?

 

 

Financing and leasing an asset are two common methods used by companies to acquire the equipment and tools they need. Understanding the differences between these two options, as well as your company's specific needs and goals, is essential in making the right decision.

 

Financing (Buying) an Asset

 

Financing is purchasing an asset through a loan or other credit arrangement. The company pays for the asset over time, usually through monthly payments, including interest within the lease expense.

 

Pros of Financing:

  • Ownership: You own the asset and can use it as you see fit without any restrictions.
  • Depreciation Benefits: Owning the asset allows you to benefit from depreciation for tax purposes under the lease liability
  • No Usage Limitations: There may be no limits on how much you can use the asset.

 

Cons of Financing:

 

  • Higher Initial Costs: A down payment may be required, and monthly payments due to the interest expense may be higher than leasing.
  • Responsibility for Maintenance: The owner is responsible for all maintenance and repairs, not the finance company

 

Leasing an Asset

 

Leasing is like renting the asset for a specified period. At the term's end, you can purchase the asset, return it, or renew the lease at the end of the lease period. There are two main types of leases: operating and capital.

 

Pros of Leasing:

  • Lower Upfront Costs: Leasing usually requires little or no down payment and a fixed rent expense / monthly payment.
  • Flexibility: Leasing offers more options at the end of the term, like renewing, upgrading, or returning the asset.
  • Maintenance May Included: Depending on the lease agreement, the lessor might cover maintenance and repairs.

 

Cons of Leasing:

 

  • No Ownership (in most cases): You typically don't own the asset unless you opt for a capital lease or purchase option at the end of the term.
  • Potential Restrictions: There may be limits on usage, customization, etc.

 

Which One is Right for Your Company?

 

The choice between leasing and financing depends on various factors, such as your company's cash flow, tax situation, long-term goals, and the specific nature of the asset if you wish to continue as the legal owner. Here's a general guide:

 

  • Consider Financing if:

    • You want to own the asset long-term via a finance lease structure
    • You plan to use the asset heavily without restrictions.
    • You can benefit from depreciation on your taxes.

  • Consider Leasing if:

    • You want to conserve cash flow with lower upfront costs.
    • You prefer to keep the options open to upgrade or return the asset.
    • You want to minimize the responsibility for maintenance.
    •  

Consulting with 7 Park Avenue Financial, a lease financing expert who understands your industry and the Canadian financial landscape, can provide personalized guidance tailored to your company's unique needs and goals. Whether leasing or financing, the right decision aligns with your strategic business objectives, enhancing growth and sustainability.

 

 

Overview of Asset Leasing Companies in Canada & The Role of Canadian Independent Leasing Companies

 

 

Independent leasing organizations in Canada provide hundreds of millions of dollars in asset, equipment, and business financing. They are robust alternatives to traditional banking solutions, emphasizing quality service and often extending extra effort to secure favourable rates, terms, and structures for your business.

 

Key Benefits / Advantages  and Considerations of Leasing Finance

 

Leasing finance offers the convenience of having the equipment paid for by the lessor. Once you confirm its functionality, you can utilize the asset to enhance profits and revenues.

 

Types of Leases and Decision-making Factors

 

Understanding your needs is crucial in selecting between the two main types of leases: capital lease and operating lease. A capital lease allows you to own the asset eventually, while an operating lease offers the flexibility to return it at the term's end.

 

Other essential elements include the lease's term and potential negotiation around payments. Lease Financing in Canadian Banks

 

 Limited Focus of Major Banks on Lease Financing

In Canada, banks offer limited options for lease financing. Their inability to provide operating leases and stringent credit criteria can limit their appeal, even if they often offer more attractive rates. Bear in mind that banks engaged in lease financing may want to handle all your business financing, which could affect other existing relationships.

 

Conclusion - Making the Right Choice in Lease Financing

Lease financing and asset leasing stand out as a proven method for businesses seeking innovative asset finance strategies in Canada.

 

Talk to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with options and explore which type of lease suits your firm.

 

Though not a one-size-fits-all solution, considering the pros and cons of lease financing can place you in a robust position to make an informed business financing decision tailored to the unique needs and aspirations of the Canadian market. By weighing these factors, Canadian businesses can navigate through the complex world of lease financing with confidence and success.

 

 
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION 

 

What are the primary types of leasing available to Canadian businesses?

The primary types of leasing are capital leases, where you can ultimately own the asset under a lease contract, and operating leases, allowing you to use and return the asset at the end of the term. Both solutions are excellent for conserving cash and financing cash flow.

 

Both financial and operating leases are prominent in the world of asset leasing. Though they may seem similar at a glance, there are several critical differences between the two that you must understand.

  1. Duration and Payment Terms:

    • Financial Lease: The lessor permits the lessee to utilize their asset for a prolonged period in exchange for regular payments.
    • Operating Lease: Here, the lessee can use the lessor's asset only for a shorter period, also against periodic payments.

  2. Accounting Treatment:

    • Financial Lease: This requires recording in the accounting system, reflecting a closer connection to ownership via the lease payment
    • Operating Lease: This doesn’t need to be recorded under standard accounting practices and is considered "off the balance sheet."

  3. Ownership Transfer:

    • Financial Lease: Ownership typically transfers to the lessee at the end of the lease term
    • Operating Lease: Ownership remains with the lessor - not on the company's balance sheet

  4. Nature of the Contract:

    • Financial Lease: Often referred to as a loan agreement or contract.
    • Operating Lease: Usually framed as a rent agreement or contract.

  5. Cancellation Terms:

    • Financial Lease: Generally, it can't be cancelled once agreed upon.
    • Operating Lease: This can usually be revoked during the initial period.

  6. Tax Considerations:

    • Financial Lease: Allows for tax deductions on depreciation and finance charges.
    • Operating Lease: Enables tax deductions for rent payments.

  7. End-of-Term Options:

    • Financial Lease: Often includes an asset purchase option at the end of the contract.
    • Operating Lease: Typically, no such offer is available.

In summary, while financial leases are more akin to purchasing an asset with extended terms and ownership rights, operating leases are closer to short-term renting without any transfer of ownership. Understanding these differences is essential for lessors and lessees to make informed decisions aligning with their financial strategies and requirements.

 
 
 
 

 Why should I consider leasing finance over traditional bank financing

Leasing finance often provides more flexible terms and structures for monthly lease payments and may extend an additional effort to secure favourable rates. Unlike conventional banks, leasing companies may not require handling all your business financing, allowing more control and freedom.

Business owners should consider a lease vs buy analysis for larger transactions with a focus on the economic life of the asset

 

Can banks in Canada provide operating leases?

Major banks in Canada usually have a limited focus on lease financing for a lease asset. They may not provide ' fair value ' operating leases, but they can provide finance leases through internal leasing divisions within the bank. Working with specialized leasing companies might be more suitable if an operating lease is desired.

 

What are the key advantages of using a specialized leasing company instead of a bank for lease financing?

 

Specialized leasing companies in Canada focus more on product and service delivery, offering flexibility, potential savings, and personalized structures. They might also provide options banks can't, such as operating leases.

 

What is asset lease financing?

 

Asset lease financing is a significant medium- to long-term financing method. In this arrangement, the asset's owner, the lessor, grants another party, the lessee, the right to utilize the leased asset. The lessee makes periodic payments to the lessor in exchange for this right.

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2024

 

 

 

 

 

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil