What is a finance lease for equipment?

Equipment leasing / equipment loans under a ' finance lease ' transaction denotes a lease to own transaction where the company intends to own the equipment at the end of the lease tem as opposing to buying it outright for cash at inception and acquisition. Numerous assets and technologies can be finance under this capital lease scenario.

Best Equipment Financing Leasing Rates From A Lease Specialist

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EQUIPMENT FINANCING CANADA

Savvy Canadian business owners and financial managers know that leasing is not always about price when it comes to equipment leases, it often should focus on issues such as structure, terms, covenants, etc. when you finance an equipment purchase.

When you invest in equipment, it can be difficult to keep up with the ever-changing technology. As soon as one version becomes obsolete or inferior due to its high costs of ownership and operation requires hard business decisions.

ACHIEVING THE BEST EQUIPMENT LEASING FOR YOUR BUSINESS

However, having said that, how does the business owner ensure that he is in fact getting a rate that is very competitive on a business loan/ equipment finance solution, if not ‘the best that his firm can achieve when understanding the process around the lease equipment application- including the issues of ' poor credit ' in some circumstances?

EQUIPMENT LEASING

Let’s look at the factors that affect lease pricing from a leasing company. Lease financing in Canada is a specialized industry, and we encourage clients to ensure they seek out and work with a trusted, credible, and experienced lease financing advisor in this area of acquisition financing to acquire new technology or new equipment.

HAVE QUESTIONS ABOUT EQUIPMENT LEASE RATES?

So what factors affect your lease rates – first and foremost it is overall credit quality. But let’s review some of the inherent math of leasing to ensure you can make that overall credit quality work for you.

The overall amount of the asset you are financing affects the rate in many cases – larger transactions with higher credit quality also play a large component in the overall final rate. Lease financing in Canada can range from five thousand dollars to 50 million dollars and of course everything in between.

The other key factor you should realize is that the term of the lease (in other words the length or amortization of the lease) is also a critical factor in final lease pricing. Longer terms tend to drive better rates around your monthly payments Why is that? Simply because the lease firm is locking in a guaranteed yield on the transaction, and when that yield is even longer, that affects your pricing – usually for the better.

Realize though that in certain cases the overall credit quality of your finances may necessitate a shorter-term being offered or approved. In that case, lease pricing tends to go up. So a Canadian business who thinks they can get the best rate for a 2-year lease is often mistaken – lessors in Canada tend to prefer lease terms of three to five years.

Many of our clients are unsophisticated financially, so when it comes to lease financing and pricing they also do not fully understand how some structuring features in leasing affect their pricing. When you are asked to provide a lessor with either a down payment or a security deposit this increases the overall yield to the lessor – so you are laying out cash and financing less, therefore driving the rate up.

Utilizing a financial calculator (not a regular calculator) will allow you to exactly determine the exact rate you are being quoted. By simply entering values for:

If you think the rate is too high you of course have the option of calling every lease company in Canada, revealing your financial information, and negotiating a rate. By the way, we don’t recommend that! The best solution is to work with an experienced leasing specialist to ensure he or she feels you have a ‘competitive' best rate around your rental expense/monthly lease payment.

The dangers of doing that on your own are that your financial condition is quickly spread all across the industry, and secondly, credit reports on yourself and your firm are potentially drawn and lowering your overall credit scores for your firm and yourself as a potential guarantor

We also advise clients that working with larger more established firms will generally drive the best rate for your transaction. Why is this? Simply because these firms themselves are funded in a more cost-effective manner than small firms who are capitalized from private type sources.

CONCLUSION - UNDERSTANDING EQUIPMENT FINANCING AND LEASING

When you're looking for ways to cut your costs, equipment leasing might be the answer. It can help a company, small business or large to acquire new or replacement purchases A business can get the equipment the business needs without having to purchase it outright.

In summary: the rate, of course, isn’t everything when it comes to commercial equipment leases from leasing companies, but it’s important.

Understand the key elements of financing business equipment and how a lease price is calculated; Speak to 7 Park Avenue Financial, with a trusted Canadian Business Financing advisor to ensure you understand how your firm’s credit quality will be adjudicated. We also note that the type of asset and its overall collateral value play a role in your best lease pricing when you require new or used equipment as you focus on the need to lease equipment to grow and run your business.

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

What are the major benefits of equipment leasing?

Leasing gives businesses peace of mind without worrying too much about their finances by giving them flexibility with payment terms.

' Canadian Business Financing With The Intelligent Use Of Experience '

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

Best Leasing Rates For Equipment Financing Lease Specialist | 7 Park Avenue Financial