The Benefits Of Financing Your Technology

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Computer leasing has many companies not fully understanding all the benefits that come from financing your technology, telecom and software needs. Let's dig in.

We're discussing the acquisition and financing of computers and technology in a couple of segments of your business... The proper term for this type of financing is 'Technology lifecycle management'. That's what the pros call it - our customers keep it a bit simpler: 'Should I buy or lease my firm’s new computers and software and related products and services?'

Two old adages related to leasing still ring true when it comes to the technological aspect. That is that businesses should finance something that depreciates, and should buy something that appreciates in value.

Most business owners and consumers as well know very well that computers depreciate in value. Systems we paid thousands of dollars for years ago are now hundreds of dollars. Walk into any 'big box' retailer and see the dramatic moves in technology.

Business owners who finance technology demonstrate a higher level of cost-effectiveness. The company wants to reap the benefits of the technology over the useful life of the asset, and, importantly, more evenly match the cash outflows with the benefits.

Leasing and financing your technology allows you to stay ahead of the technology curve; that is to say, you are always using the latest technology as it relates to your firm's needs. Also, you're minimizing cash outflows as they relate to the spending you incur on computers, software, etc.

Businesses that lease and finance their technology needs are often working better within their capital budgets. Bottom line: You can buy more and buy smarter!

Many companies that are larger in size have balance sheet issues and ROA ('return on assets') issues that are compelling. They must stay within bank credit covenants and are measure often on their ability to generate income on the total level of assets being deployed in the company.

Lease financing allows those firms to address both of those issues. Companies can choose to employ an 'operating lease' structure for their technology financing. This is more prevalent in larger firms but works almost equally as well in small organizations.

Operating leases are 'off balance sheet'. The firm adopts the stance of using technology, not owning technology. The lessor/lender owns the equipment and has a stake in the residual value of the technology. The main benefit for the company is that the debt associated with the technology acquisition is not directly held on the balance sheet. This optimizes debt levels and profitability ratios.

At the end of those operating leases, which are usually 36 months long, the customer has the option of:

3. Negotiating an extension of the financing for continued use of the computers, technology, etc.

Companies that have recently acquired computers and technology can in fact negotiate a' sale leaseback' on those same assets. This financing strategy brings cash back into the company, as the firm has employed a leasing and financing strategy building on our above noted them - using technology, not owning technology.

* Computer leasing and financing has significant balance sheet and income statement benefits

* The firm has flexibility with respect to buying new product, returning existing technology, and generating cash flow for purchases already made

Many of the benefits we have discussed relate to leasing in general. However, technology and lease financing are very perfectly suited to the business financing strategy of leasing.

Working capital saved on computer leasing, and equipment leasing in general, allows a company to use that capital to grow revenues. Depending on which types of leases are utilized there are also tax benefits associated with leasing.

With the current focus on the environment, customers can work with their vendors to return unused equipment at the end of the lease for proper 'green' disposition. Speak to a trusted, credible and experienced Canadian business financing advisor who can provide you with the best strategies on computer leasing and financing.

' 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

Computer Leasing Financing 7 Park Avenue Financial