Today’s rapid changes in computers, telecom equipment and other technologies require of course that you stay ‘leading-edge'. Naturally, there is a cost to acquiring the newest and the best over the long term. In our first point, we ironically are encouraging you to immediately start thinking about the ultimate use and benefit and value of the equipment.
ASSESSING THE PROS AND CONS AROUND TYPES OF LEASES TO FINANCE TECHNOLOGY AND OTHER EQUIPMENT
To do this you need to have the basics of two types of leases. What are those two types? They are ‘Capital’ and ‘Operating'. How can we more clearly define how you should think of those two types of leases?
It is simple – As a Canadian business owner or financial manager you want to ask yourself two questions - Do I want to use this asset and return it when it’s reached its useful life, or do I want to own it at the end of the term of my lease?
The industry puts many technological, financial, and marketing spins on these two choices, and this is where business people get confused, so simply focus on two words,' use or ownership'.
THE CAPITAL LEASE SOLUTION - I.E. LEASE TO OWN!
If you wish to own the assets – i.e. computers, telecom equipment, high tech business equipment for your production, printing presses, etc., then you should focus on a capital lease. At the end of the term of that lease you will own the asset. The reality though is that technology changes rapidly – our most obvious example is computers which have an obsolescence factor over a period of time.
As such you want to seriously consider returning the equipment at the end of the lease. That will more often than not lower your cost, and in some cases have huge financial benefits around your balance sheet and operating expenses and tax advantages.
FINANCING SOFTWARE ( YES - SOFTWARE SOLUTIONS CAN BE FINANCED )
Our second point, i.e. our critical tip # 2 is that you should fully understand that most soft costs, for example – software – can be included in your purchase. Software can be financed, which many business owners and financial managers either didn’t know or didn’t consider, offering a variety of monthly payments suited to your software acquisition.
In today’s environment hardware assets tend to be more of a commodity and it’s the soft costs and software that are the true drivers of technology. The costs of software and other related items to our business equipment acquisition can be staggering, so allowing leasing companies to bundle the soft costs into your total solution is a solid business decision.
Let's move on to our final point – which is putting some solid care and decision-making into what will happen to your asset at the end of the term of your lease. When we say term we simply mean that is the amount that you desire or agree on to finance the equipment acquisition.
CHOOSING THE LEASE TERM
Typical terms are 3-5 years – however, a term for up to 7 years can sometimes be negotiated depending on the dollar value of the asset, the type of technology you are financing, and your firm's overall credit quality.
If you choose the more ‘ sophisticated ‘ approach to leasing equipment and technology financing – i.e. our operating lease option, then you have automatically given yourself 3 choices for end of term decisions, as well as lower lease payment due to the residual value portion of your lease as it relates to the lease term- Operating leases tend to be viewed as short term options for asset acquisition give that Computers and other technology eventually become obsolete or require upgrading.
And it is you, not the lessor that makes those choices, thereby empowering you to drive the true value of the acquisition. Those choices are: return the equipment, upgrade the business equipment, or purchase it for fair market value if you still feel it has a useful economic life.
Benefits of Leasing IT Equipment & Computers
Businesses are beginning to rely on leasing IT equipment and other technology. Leasing hardware, software, licenses, service plan warranties, consulting services, and labour can all be easily funded. It’s scalable so you can add equipment easily as your company grows without delay - as well as the application process being easy.
The cash conservation aspect of leasing IT equipment shouldn't be overlooked - Your business will have fewer upfront costs and the whole issue of monthly budgets and capital expenditures analysis become much easier with predictable cash outlays around those larger capital expenditures- Leasing is all about 100% financing with minimal up front down payments around purchasing the equipment, etc.
With tech being a constantly changing industry, leasing is key for freeing up cash, keeping your team happy, surpassing your competition, and staying up to date in your market. Leasing is key to keeping your staff happy and keeping your business thriving
CONCLUSION - HOW AND WHY TO LEASE EQUIPMENT AND TECHNOLOGY IN CANADA
Buying equipment, whether it's new equipment or used ( yes used equipment can be financed !) can be a challenging decision in business.
Speak to 7 Park Avenue Financial, a trusted, credible, and experienced lease financing advisor to determine which options most suits you, and you will also get assistance in walking your firm confidently through the sometimes turbulent technology financing maze when it comes to acquiring needed types of equipment solutions for your business.
Let our team walk you through lease terms and leasing options around your business needs and ensure you get the best funding possible.
FAQ: FREQUENTLY ASKED QUESTIONS
Is Leasing Computer Equipment Right for Your Business?
Leasing computers is an attractive option for companies who have a storage room full of outdated equipment. Some companies only rely on computers for inventory or accounting, while others, like web design companies, use of computers to generate revenue. leasing computers is like renting them or rent to own in some situations.
At the end of a leasing contract, you can purchase your leasing computer equipment, or send them back. Leasing computer equipment can be beneficial to any company no matter how much or little you need to use it. Rates and terms will vary based on transaction size, credit quality, etc. and are structured to be flexible based on your budget.
What questions should you ask when leasing equipment & Technology
If your equipment requirement is relatively small, you may need to buy it. Leasing equipment may be a cheaper option if you have a low-interest loan. Naturally, if you have the money and a transaction is smaller in size an outright purchase can be considered. If you need a large amount of equipment, leasing might be a better option. . Ask what questions you need to know to get the best deal to get good prices for equipment, such as rates and costs for financing equipment?
