Most Canadian business owners know all about the advantages of leasing business equipment and other assets in the Canadian marketplace. If you don’t know those advantages, you should.
But what are the 3 things that you need to know to achieve maximum rates, terms and structures for your firm? Here are those three critical elements and information you can use to your advantage in negotiating the best lease financing for your equipment acquisition.
Here are the three things you need to know:
1. Customers get to pick their own lease rate
2. Any asset can be financed
3. Who you deal with will ultimately decide whether you have been properly successful in negotiating the best lease financing
So, clients ask - How is it possible that we as clients get to pick our own lease rate? Isn’t that impossible? Here is what we mean by that, as clients are always surprised by our comment. In fact they jokingly confirmed they would like the lowest rate – wouldn’t we all.
When we make the ‘pick your own rate' statement what do we really mean? Simply that all leasing firms have to be competitive to stay in business. In leasing your rate, and in fact the overall structure, is determined by your credit quality. No one knows your firm's credit quality better than you the Canadian business owner or financial manager - the best rates in Canada are achieved if you have growing sales, growing profits, and growing cash flow. In fact, whether you like it or not, your ability to show historical and future cash flow generation is in fact probably, in our opinion, the largest factor in final lease approval and achieving the best rate. So, by understanding where your firm is at re balance sheet, profits, and sales growth will allow you to properly project the fact that you deserve a market competitive rate. Leasing companies do a poor job of conveying rate sometimes, they use rate factors and terminology such even industry people get confused on – those terms might include things like ‘residual, full payout, down stroke, bargain purchase option, effective rate', etc., etc.
In most cases when assets you are acquiring are significant it is strongly recommended that you utilized the service of a trusted, credible and experienced business lease financing advisor who will work on your behalf to wade through the terms and the rates and proposed structures on only your behalf.
Let’s move on to Critical point # 2 in our info – all assets can be financed. Many firms are not aware that both new and used equipment can be financed. The financing of used equipment in Canada is a huge business. Another key point we can make here is that soft costs can often be included in your lease. One of the largest soft cost components in leasing today is software – many are not aware that software can be financed. And when it comes to equipment for shops and plants you can often include maintenance, warranty, installation, and delivery as part of your overall lease financing strategy. Customers lay out thousands of dollars only to be told by us that they could have saved that valuable cash flow and included it in the lease.
Finally, point 3 – Leasing in Canada is fragmented and diverse. Companies do business geographically, in some cases only by asset type – i.e. computers, technology, and firms in Canada might do business here but be foreign-owned and funded. Investigate who you are dealing with to ensure you have a proper match with your required lease financing benefits.
Being a well-informed lessee in these three critical areas will undoubtedly guarantee you lease financing success.
