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One Thing You Need to Know About Canadian Machinery Finance Equipment Lending to Make Your Lease Or Loan Work!
Turn Leasing Cost Into Profit!  Possible?  Yes it is!

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We're going to turn that one thing you need to know about equipment lending for your machinery finance and other lease and loan needs into a multitude of good news benefits! 

Let's share and explore some tricks of the trade to make your equipment financing loan or lease strategy more profitable than you ever thought it could be, with options we are pretty sure you have never even heard of that have the potential to turn the lease financing of your assets into a profit center under the right circumstances.

Today we are focusing on the type of decision you make at the start of your machinery finance lease decision. We refer to machinery but of course, we're referring to all tangible assets you choose to finance.

When Canadian business owners and financial managers comment on the equipment lending process for their financing needs they often, unfortunately, do a poor job of determining how they will handle the end of the lease option. This option can make or break the overall cost and profitability around your lease finance decision.

Let's use one practical example and demonstrate our point. Let's say you are following our advice and make a conscious decision that the asset will last you 5 years. (We are sure not talking about computing technology of course! - No 5 year terms recommended on technology!)  What you need to do now is ensure that any analysis you make around the cost of ownership to the same term as you have picked for your lease. Mismatching those costs and benefits is highly inappropriate.

So, back to the core of our subject, which is the one thing you need to know - and that is that you have numerous profit and cut your loss type strategies at the end of your lease. Some of this is determined by what you sign up front, further enforcing our point that you need to view the whole equipment lending cycle in your mind at the start of your transaction.

Ok, let’s make some money, or cut our losses. How do we do that?  First of all, if you know for sure that you have a good handle on the assets useful life based on your experience enter into an operating lease, not a capital lease to own, thereby giving yourself the flexibility to return the equipment to the lessor at the end of the term. Let the lessor take the risk on the asset and its disposition.

That same operating lease strategy has a dual benefit if you are at the end of the term, and you think the asset is performing well and generating revenues and profits then agree to purchase the equipment from the lessor at the end of the term. Don't forget that you and the lessor need to agree on what its true fair market value is.

 

Want to renew the lease at the end of our 5 year term - with a view towards still owning the asset. Then negotiate forcefully with the lessor for a reduction in your monthly lease payment. Can you do this? You sure can, because the lessor has already extracted all their profit on the original deal, having assumed you would terminate the transaction.

Here a true secret profit strategy. If you feel there is a significant useful life in the asset consider purchasing it from the lessor at its fair market value and then sell or rent it to another firm who might need it. You just turned a former equipment lease liability into a profit center!

 

One final strategy is to purchase the equipment based on your knowledge of its value, use it for a specified period, and then trade it in for a new upgraded asset - thereby lowering your lease cost on the newer asset!

So, whets our bottom line. It’s simple. You need to be informed about the lease life cycle, understand what the equipment lending cycle is all about when it comes to your options and flexibility. Whether it’s a machinery finance loan, computing technology, or an aircraft, the ability to see your end of term options at the start of your equipment lending decision will make or save you thousands of dollars. Speak to a trusted, credible and experienced Canadian business financing and leasing advisor to reduce your costs and improve your profits by sound lease finance knowledge.

 

 

 

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' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2024

 

 

 

 

 

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