YOUR COMPANY IS LOOKING FOR EQUIPMENT LEASING VIA BUSINESS LEASE FINANCING!
TYPES OF EQUIPMENT LEASING IN CANADA TO SOLVE YOUR ASSET ACQUISITION NEEDS
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Business Equipment Leasing: A Competitive Advantage for Your Business
Business equipment leasing can provide a significant advantage for companies that frequently need to replace assets or update technology. Making the right financing decision at the right time can be crucial to a business's success. This article explores the benefits of business equipment leasing and when it's a viable alternative to consider.
When to Consider Business Equipment Leasing
Owners and financial managers should consider choosing lease financing and leasing business equipment. In comparison to traditional funding like business loans or bank loans, leasing offers several advantages that can make it a more suitable choice. Lease brokers can also be valuable in guiding businesses through the leasing process.
How and Why Equipment Leasing Works
Here are the top ten reasons why commercial equipment leasing is a practical solution for businesses:
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Lower Cash Outlay: Leasing allows businesses to extend the lease term, reducing the initial cash outlay required.
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Competitive Rates: Traditional financing options in Canada typically offer competitive rates based on credit quality.
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Preserve Credit Facilities: Lease borrowing does not affect existing credit facilities, making it available for other business needs.
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No Equity Dilution: Leasing helps avoid equity dilution since debt is generally more cost-effective than equity.
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Maintain Working Capital: By leasing, businesses can preserve their working capital for day-to-day operations.
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Flexible Payment Structures: Lease payments can be tailored to accommodate seasonality and capital budget constraints.
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Tax and Accounting Benefits: Leasing offers tax and accounting advantages related to depreciation and lease expenses.
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Pre-Tax Savings: Lease payments are made from before-tax savings, enhancing financial benefits.
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Access to Costly Assets: Leasing enables businesses to acquire and upgrade assets that might be too expensive.
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Bundled Services: Miscellaneous services like maintenance, service contracts, and installation costs can be included and financed as part of the lease agreement.
The Lease vs. Buy Decision
While some might overlook the benefits of equipment lease finance, it remains a crucial aspect of business success. Considering factors beyond the pride of ownership, businesses can take advantage of the constant technological advancements and avoid depreciation risks associated with owning assets.
When to Consider Operating Leases or Rentals
Operating leases offer an attractive option for assets prone to obsolescence or temporary requirements versus a long-term equipment loan. Business owners and financial managers should consider leasing when their company relies heavily on capital-intensive assets to conserve cash and credit lines.
Understanding Equipment Leasing & Financing: The 3 Key Choices
In Canada, equipment leasing companies offer three fundamental choices: capital leases (equivalent to asset ownership), operating leases/ fair market value leasing, and sale leaseback. Businesses can finance new and used equipment, with tech assets being popularly funded across various sectors.
The 4 Choices Available for Leasing Assets
When considering leasing and equipment loans, businesses have four main choices:
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Commercial Finance Leasing Companies: Private firms specializing in equipment leases.
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Bank Leasing Companies: Closely tied to Canadian chartered banks, offering attractive rates for qualifying firms.
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Captive Leasing Companies: Finance firms directly related to the equipment manufacturer, offering favourable terms.
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Business Financing Advisors: Trustworthy advisors with knowledge and relationships with various leasing firms, providing valuable guidance.
Knowing when and how to lease business equipment can significantly impact a company's competitive edge and financing success. Seeking the assistance of a reputable Canadian business financing advisor, like 7 Park Avenue Financial, can help businesses make informed decisions about their equipment acquisition needs. Leasing provides an excellent funding solution for businesses aiming to grow their sales and expand their offerings without prohibitive upfront costs.
Business equipment leasing can help your business stay competitive. That shouldn’t be a mystery if your company, either once in a while or constantly needs to replace assets or technology in your business. As always, it's a question of the right time and place. Let's dig in.
WHEN TO CONSIDER THE LEASE ALTERNATIVE
So exactly when should owners and business/financial managers consider the lease financing alternative and leasing business equipment? Should a business loan or bank loan be considered? Should you consider lease brokers? We're glad you asked, as we’ve got some basic do’s and don'ts on what works and when, and as importantly, with whom when it comes to business equipment leasing companies.
TOP TEN REASONS WHY COMMERCIAL EQUIPMENT LEASING WORKS!
1. The ability to extend the term of a lease lowers cash outlay
2. The majority of equipment financing in Canada is ' traditional financing' and offers rates commensurate with credit quality
3. Bank and other credit facilities remain unaffected by lease borrowing - start-up business equipment leasing is also available
4. No equity dilution in the business - Debt is cheaper than equity
5. Business can maintain their normal working capital needs
6. Numerous lease payment structures can be tailored to your firm's needs around seasonality, capital budget constraints, etc
7. Tax and accounting benefits re depreciation, lease expenses, etc
8. Lease payments are paid from before-tax savings, not after-tax profits
9. Financial leasing Allows businesses to purchase and upgrade assets that normally might be considered too costly
10. Bundling of miscellaneous services in the equipment lease agreement, such as maintenance, service contracts, install costs, etc., is easy and can be financed as part of the lease
THE LEASE VERSUS BUY DECISION
Forgive us in advance if you think it's been overdone or understated, but ensure you haven't ignored the benefits of equipment lease finance. Those benefits are often benchmarked when you get into issues such as 'pride of ownership,' assets that, in fact, might appreciate (not depreciate) or if your firm is lucky enough to have extra cash all the time. For more information on the lease versus buy decision, click here for an article by 7 Park Avenue Financial.
WHEN SHOULD THE BUSINESS OWNER CONSIDER OPERATING LEASES OR RENTALS?
We think we can count on one hand the number of assets that appreciate over time these days, and items such as computers and software certainly aren't one of them. Many businesses use ongoing 'operating lease' strategies to constantly 'refresh' their 'tech' needs and minimize lease payments based on lease terms and the asset's residual value in operating leases.
Assets such as these are frequently subject to obsolescence or, in some cases, are only temporarily required. The ' end of the lease' decision that lessees must make is an important one,
So when exactly should a firm's business owner or financial management consider leasing? Capital-intensive businesses rely heavily on lease finance - they don't want all their cash or credit lines being used for long-term asset acquisitions. For used equipment, lessees must be able to validate the purchase price from a commercial seller.
In many cases, the lease company financing is very competitive to term loans when it comes to ' rates ' - but at the end of the day, it's almost always about capital conservation. Most business owners always focus on just the interest rate, but many other issues must be considered.
Don't forget to ensure you have the right knowledge and advice about accounting and tax benefits and issues as they relate to equipment financing and the lease payment/rental expense around Canadian lease services. The proverbial ' lease versus buy ' decision can quickly help you identify cash flow and payment issues, knowing that the best leasing companies will provide good business advice. Talk to the 7 Park Avenue Financial team.
So now that you've determined when to lease, the question becomes ' with whom '?! As you consider an equipment lease firm, you should, at the same time, have a reasonable working knowledge of what type of lease you want.
WHAT ARE THE 3 KEY CHOICES IN EQUIPMENT FINANCE
That translates into 3 basic choices in Canada from a leasing company, capital leases (i.e.' owning the asset' is the answer to ' what is a capital lease ' ), operating leases, and the leasing back of your assets. Respectively these choices are known as capital leases, operating leases, and sale-leaseback. Medical equipment lease finance is an excellent example of an industry that might utilize both capital leases and operating leases.
Both new equipment, as well as used equipment can be financed. For used assets, the transaction must be commercial and not a ' private sale.' Tech assets such as computers/software/telecom etc. are top-rated assets typically financed by most firms. For more info on technology and financing, click here.
The U.S.-based Equipment Leasing and Finance Foundation reports that for 2023 as an example, company investments in computers and technology rose 20% in the first quarter alone! Talk about a refresh! Commercial equipment leasing rates are at an all-time low in today's low-interest environment.
WHAT ARE 4 CHOICES AVAILABLE TO BUSINESSES CONSIDERING LEASING ASSETS
Did you know you have 4 different choices regarding whom you should be leasing?
Your four choices are:
Choice # 1 - Commercial finance leasing companies are most often private firms specializing in equipment leases
Choice # 2 bank leasing companies in Canada; these are closely tied to their parent companies, Canadian chartered banks, and compete with non-bank Canadian leasing companies - Commercial bank leasing rates and terms are exceptionally attractive for firms that qualify under bank lending criteria
Choice 3 is often a fabulous choice. These are the prisoners! Prisoners? Well, we mean captives. They are finance firms related directly to the manufacturer of the business equipment you wish to lease. Finance equipment via captive leasing companies related to the manufacturer is always a good deal!
Choice # 4 is often the safest bet. It's a Canadian business financing advisor with knowledge and relationships with the above firms. With the right credentials and reputation, these players can bring true value and save you thousands of dollars on any transaction. Look for experience, credentials, etc.
CONCLUSION
Ready to unlock the potential of business equipment leasing and secure a competitive edge for your company? Don't miss out on the numerous benefits it offers, from preserving working capital to accessing costly assets. Take the first step towards financing success and growth by consulting with our experienced Canadian business financing advisors at 7 Park Avenue Financial. Let us guide you through the process and find the perfect equipment leasing solution tailored to your business needs. Contact us today to explore your leasing options and propel your business forward!
Knowing why, when, and how to lease your asset needs will help put your firm firmly positioned with your competitors and on the track to financing success. Leasing equipment for small businesses is always a challenge for funding new assets - so any finance solutions are welcome! The equipment cost should not be prohibitive when you want to grow sales for your products or services.
Knowing when and with whom to finance your assets can put your firm on the track of business financing success. Speak to 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your business equipment asset acquisition business needs.
FAQ: FREQUENTLY ASKED QUESTIONS
How do equipment leases work?
In an equipment lease, the lessor, i.e. the leasing company, purchases the equipment to be leased and enters into a lease or rental agreement for a monthly fee. Typically leases are done at fixed interest rates, allowing the lessee to budget for payments based on their cash flows.
Can you lease used equipment?
Used equipment can be financed under either a capital or an operating lease option. In Canada, used equipment must be purchased as part of a regular commercial transaction, not a private sale. The same lease benefits and tax advantages still apply when buying and financing used assets.
What is Equipment Leasing
The equipment lease is a legal agreement between the leasing company, aka the ' lessor ' who purchases the asset and owns the equipment for the duration of the lease. At the end of the lease, typically, ownership reverts to the lessee based on the terms of the lease agreement. Lease agreements specify monthly payments for the term of the lease. Any business asset can be financed.
Click here for the business finance track record of 7 Park Avenue Financial.
