YOUR COMPANY IS LOOKING FOR AN EQUIPMENT LEASE COMPANY FOR FINANCIAL LEASING!
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Not fully up to speed on how, when and why to deal with an equipment lease company in Canada? Financial leasing for capital assets for your business needs doesn't have to seem like the occult to your company. Let’s establish some common-sense ground rules on equipment leasing in Canada. Enter clarity!
It tends to start at the ‘leasing versus buying' decision. Whether you are a start-up, in the SME sector, or a major corporation financial leasing of an asset will often work far better than an outlay of your firm’s cash in the form of a purchase.
An oft-touted but oh so true advantage of an equipment lease is simply that it allows you to maintain up to date assets, thereby allowing your company to stay both productive and competitive. In many cases, it’s quite costly as it can be costly to maintain obsolete assets that are deteriorating in value.
In the case of computing or telecom power for your firm the increased power, capacity, and all those bells and whistles of new technology makes lease financing a perfectly logical financial decision.
In Canada businesses spend billions of dollars each year on new capital asses - Again, that can be rolling stock, plant equipment, telecom and computer assets, office equipment... basically anything! And in North America, 80% of all firms utilize the concept of financial leasing to acquire that asset.
How much you pay in your lease contract is determined by two things, of course, it’s the rate inherent in the lease, and secondly, the type of lease you enter into and its structure.
In Canada, you pretty well have two choices - the capital lease and the operating lease. When you choose an operating lease one of the key benefits is simply that your monthly payment will be smaller. At the end of the lease term, the asset isn’t quite fully paid for. Why is that? Simply because the lessor (or another third party who you need to know about, right about now!) has made a residual investment in your transaction. In essence, they made up the difference at the time your asset was paid for by the financial leasing company.
So now what then? You're at the end of the term of the lease and you don't own the equipment! Don't despair, because if you have a properly crafted operating lease you are the 'fork in the road'. Your options now are to purchase the asset for its current fair market value, return the asset, or thirdly enter into an extension or upgrade on your transaction.
Capital leases seem to a more straightforward kettle of fish. Your payments are traditionally more than an operating lease, if only because you are paying in full, with interest, for ownership at the end of the term.
When you are at the start of your transaction, our previously referred to lease vs. buy decision what must you consider to make one of the two choices above.
Those issues for consideration are monthly payments and cash flow, down payments, the obsolescence issue on your asset, your firm’s current cash flow situation, and your credit arrangements with existing lenders.
Canadian firms that want to grow their business and manage their assets properly should consider dealing with a solid equipment lease company or advisor as a partner for the future. Speak to a trusted, credible and experienced Canadian business financing advisor for help in making the right decisions in this critical aspect of your company's business.
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