YOU ARE LOOKING FOR THE BEST LEASING RATES & BUSINESS FINANCING
LOWER MONTH PAYMENTS VIA BSET EQUIPMENT LEASING SOLUTIONS
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Financing & Cash flow are the biggest issues facing business today
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It may seem difficult for Canadian business owners and financial managers to think they can achieve the best leasing rates and business financing with lease companies in Canada.
HOW TO GET CREDIT APPROVAL AND SOLID LEASE RATES
It's not as hard as you think, and we're going to demonstrate to you some key methods to ensure you understand and can achieve prompt credit approval and solid lease pricing around your monthly lease payment.
And oh yes, some extra tips on ensuring some additional benefits not readily known to everyone would help also, and we’ll be sharing those also.
Most business owners know intuitively that they should be leasing - one simple reason is that millions of other firms are also. They simply are looking for a better or easier way to understand what makes a 'perfect' lease financing transaction.
CHOOSING THE RIGHT TYPE OF LEASE FINANCING
Ways in which you can determine what level of pricing and prompt credit approval you can achieve focus around some very basic issue - for example, do you want to own the asset, or use it. Just that decision alone will save you thousands of dollars and significantly impact working capital. Let's use a 'real world' (that’s where we work every day) example.
CONSERVE YOUR BUSINESS CREDIT FACILITIES VIA LEASE FINANCE SOLUTIONS
Let’s say your company requires some significant plant equipment as an example. The cost is, say $300,000.00. You're not entirely sure you can afford the asset; you simply know you need it, and you are perfectly sure you can't afford to pay cash for it. Imagine what that would do to your bank line of credit or cash on hand!
EXAMPLE OF A LEASING STRUCTURE
Using our example the monthly payment on a 3-year lease would be 9338$ approximately. We estimated an interest rate of 8% on the transaction. Let's say you determine that you can afford $7000/month, but not $9338. Does leasing provide a solution? ... It sure does?
Ask your lessor to determine the term you need to change the lease to, allowing you to fit your payment. We've done the calculation for you, and it's 51 months. And, guess what, by committing to a longer-term you can usually get a lower interest rate. Lessors like when they can guarantee their yield for a longer period. No surprise here, as that’s how they make money.
We don’t necessarily agree, but most clients we talk to are 'only' focused on the lowest pricing or monthly payment in trying to achieve those best leasing rates. Lease financing companies consider a number of factors when offering you those rates.
So what are the key issues in lease pricing, and, more importantly, which of those can you as a Canadian business owner and lessee impact upon? As an example, many business owners don't spend the right amount of time understanding their end of the lease options.
All assets can be financed via a leasing company, subject to creditworthiness. However, some assets depreciate slowly, some very quickly (think computers!), and some assets both hold their value or even appreciate in value. Asset class plays a big factor in lease pricing, so be prepared to position and defend your asset quality. Companies with poor credit often can still get approval but certain parts of a transaction might have to be restructured - a good example being a request for a down payment.
UNDERSTANDING THE USEFUL ECONOMIC LIFE OF THE ASSET YOU ARE FINANCING
The useful life of the asset is somewhat the same; don’t expect to get a 5 year lease at great rates on the state-of-the-art computers or telecom unless your firm has a stellar credit rating.
THE OPERATING LEASE SOLUTION - USING ASSETS - NOT OWNING THEM !
If your firm is entering into a short term operating equipment lease it is highly recommended that you arm yourself with the best possible date on residual values of the asset at any future point in time. That will allow you to negotiate a higher residual, and achieve the best leasing rates and financing. The residual value for a lease term is critical - most operating leases are two to three years in length.
We noted there are some aspects of leasing rates and pricing you simply won’t have an effect on. It should come as no surprise that leasing companies borrow money also. Their cost of funds and their required 'yields' determine... your lease pricing. (As well as your credit quality of course)
So we can make a broad general statement that best leasing rates are achieved by dealing with larger more well-capitalized lease companies in Canada.
WATCH OUT FOR THOSE SMALL MISCELLANEOUS FEES
In many cases, small administrative and processing fees can add up and drive up your leasing rates. Negotiate hard and determine if these additional add-on type charges are really necessary and if you can avoid them your pricing will improve. For small business owners in the SME economy, your credit score will impact interest rates and approval and possible restructuring needs. That is just one of the factors that of course affect the interest rate in lease transactions.
CONCLUSION
Simple, perhaps not, but you can see that many factors determine lease pricing. Determine which ones make the most impact on your firm, and which factors you can influence. Speak to a trusted, credible and experienced Canadian business financing and leasing advisor for assistance in achieving the best financing and lease pricing in your lease agreement Canada.
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Stan Prokop
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