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Canadian business owners and financial managers want to know they are getting a good deal when they enter into an equipment lease financing transaction. In a perfect world it would be nice to be an expert in all things we do – reality says that is not always possible.

However, in leasing finance and equipment leasing, some key basic knowledge can put you way ahead of the game. Let’s examine some of those key basics.  By ensuring clients have some of the basics under their belt, so to speak, can alleviate their concerns that equipment leasing is complex and technical. It can be, but it doesn’t have to be.

When you are entering into an equipment lease financing transaction you should be aware that you have the ability to enter into one single lease, or, if you choose, you have the option of entering into one master lease. The single lease application in Canada is the most basic form of equipment financing. Utilizing a single form application and lease you should use this form for smaller transactions – a good limit on that size of transaction is 50k and under.

If your firm is a regular leasing prospect and has the ability to source and work with a trusted partner you should consider a Master Lease scenario. This document allows you to acquire future equipment while utilizing the same terms and conditions you have negotiated once upfront. That clearly saves you time and some expense, as well as solidifying the relationship with your leasing partner.

You should ensure you understand some of the key points that affect the overall benefit of a solid lease rate, term, and structure. Some of these key points are warranties, how tax is paid and calculated, and your maintenance obligations.

When you enter into a Master lease, which is generally recommended as an investment in future financing, you should understand that your equipment leasing company has immediately gained a significant advantage in that all their competitions don’t have such an agreement in place with your firm. For that reason you should ensure you are getting a competitive rate.

In meeting with clients we continually feel they don’t fully understand how lease pricing works, as well as how to get the benefit of something that approaches the best possible pricing. The reality is that some key factors totally influence your overall pricing and your ability to present those factors in the best light ultimately leads to successful lease negotiation on the part of your firm, the lessee.

Those factors include your years in business, financings you have in place with other lenders, any references you can provide, as well as on occasion the general credit and financial stability of the owners of your firm. Larger transactions require some due diligence on your financial statements, as well as analysis around historical and projected cash flow – i.e. your ability to repay the equipment lease!

We strongly recommend that clients solicit the help of a trusted, credible and experienced equipment leasing advisor who can guide them through the basics of successful lease negotiation, with an emphasis on financial and other benefits that accrue to your firm when you complete an equipment lease financing transaction.

Stan Prokop