YOUR COMPANY IS LOOKING FOR EQUIPMENT AND ASSET LEASING SERVICES
LOOKING FOR LEASE CAPITAL?
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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Oakville, Ontario
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Financing sources in Canada come in different categories. The finance lease is simply one of the best tools to maximize capital leasing. But does every business owner/financial manager know how to maximize this method of asset financing? Let's dig in.
EQUIPMENT LEASING IS THE MOST POPULAR METHOD OF ACQUIRING ASSETS FOR A BUSINESS
We're told you can't fight a trend, and no method of financing assets has grown as equipment financing has over the last several years. North American figures suggest an overall 10%+ growth in leased asset acquisitions. The lease vs. buy question is one that business owners and their financial managers often face. Capital leases versus operation leases are another question that confronts business owners and is determined by the ultimate need and use of the balance sheet's asset.
ANY SIZE OF TRANSACTION CAN BE FUNDED VIA LEASING
So whether that’s a ' micro ticket ' LEASE ' for items under 25k, or ' small ticket ' ranging from 25k to 100k, there’s clear proof that whether its a 2k photocopier or a multi-million dollar piece of plant machinery or office technology its safe to say the evidence suggests this is one of your best methods to acquire assets.
IT'S ALL ABOUT THE CASH FLOW
The issues of cash flow ' and ' alternate sources of borrowing ' should be high on the list of key ' evidence ' analyzed by the business borrower.
WHAT IS A CAPITAL LEASE? WHAT ASSETS CAN BE FINANCE VIA AN EQUIPMENT LEASE
What, in fact, are the main types of assets that consistently are financed on a day-to-day basis by everyone, including your competitors! That ' hit list ' includes but is certainly NOT limited to :
Rolling Stock
Medical Equipment
Technology
Plant machinery
Construction machinery
etc.!
The bargain purchase option at the end of the lease transfers ownership to your company - it is often reflected as ' consideration ' in the amount of a dollar! The purchase options are your right under the lease agreement, and that option to purchase is a key part of the capital lease - aka ' lease to own transaction. The life of the asset over the lease term and the asset's ultimate ownership are hallmarks of capital lease financing. If an asset will continue to have a useful life in your business, it makes sense to denote your ownership decision via a capital lease.
OPERATING LEASE VS FINANCIAL LEASE
A short term useful life would lean your decision towards an operating lease or rental. Under accounting rules in operating leases, assets are purchased for fair market value if required at lease term. Ownership of the asset under an operating lease is not transferred to the lessee at the end of an operating lease or rental. Your right to use the asset is covered in the period of time in the lease term.
LEASE FINANCING HAS FLEXIBLE TERMS AND CONDITIONS
Business owners/managers like capital leasing because credit approval on terms they can live with is much quicker than that offered by banks and other ' term lenders.'
THE CAPITAL LEASE - IT'S YOUR ' LEASE TO OWN' STRATEGY
While the true ' finance lease ' finances 100% of your asset needs on a ' lease to own ' basis, don’t forget that many firms still take advantage of operating leases. Operating lease characteristics include the ability to use but not own an asset, typically shorter lease terms ( 2-3 years are common amortizations ), and attractive end-of-term options such as the ability to upgrade, purchase if desired, or return the asset.
The end of the lease option is often overlooked by many firms and can be an expensive mistake if addressed inappropriately. While the lease term and interest rate are important as they relate to monthly payments, etc., it is important not to overlook other aspects of your lease, including the asset's estimated useful life.
Even issues such as accounting standards regarding lease accounting for lease payments in both capital leases and operations leases should be reviewed with your financial accounting team.
HAVE YOU CONSIDERED A SALE LEASEBACK TO REPLENISH WORKING CAPITAL
We also add as a short footnote that two other aspects of equipment financing should not be overlooked - they are the sale-leaseback of assets you already own, as well as the ability to collateralize owned assets under a short bridge loan. The ownership transfer comes at the end of the leaseback, with your firm maintaining the right to use an asset.
5 KEY BENEFITS OF EQUIPMENT LEASE FINANCING IN CANADA
Capital leasing often satisfies the business owner's true objectives and offers maximum flexibility as a ' financing tool ' with ownership transfer of the asset to the lessee.
Looking for more ' evidence ' that the finance lease is right for your company? That includes:
Hedging asset life against inflation
The ability to pick terms from 2-7 years
Maximizing cash flow
Capital leasing rarely comes with restrictive borrowing covenants.
Working through budget and cost restrictions re interest expense and cash flow planning/depreciation expense - your lease is considered a legitimate business expense over the lease period - Lease payments are tax deductible!
CONCLUSION
If you're looking for ways to understand the risk and rewards of owning assets and to use Captial lease financing as a tool to run and grow your business seek out and speak to 7 Park Avenue Financial , a trusted, credible and experienced Canadian business financing advisor who can provide the evidence '!
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Stan Prokop
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