Canadian business benefits from commercial leasing and industrial equipment leasing when it comes to asset acquisitions for growth and profits.
As a small or medium sized business owner in Canada you do not want to deplete your cash resources. We would point out that larger, even public corporations in Canada have that same pressure, because when they report to shareholders the focus of their investors and shareholders is often cash flow growth and preservation.
Business owners and financial managers in Canada look to lease financing as an alternative to taking on bank term debt. Canadian chartered banks do not provide lease financing; they structure your asset acquisitions as loans which supplement your existing borrowing arrangements with the bank.
Quite often, as with any asset acquisition, its all about the monthly payment and more often than not you will find that the lease financing solution provides you with the lowest monthly payment, and in many cases you can arrange that payment to reflect your actual working capital situation – i.e. seasonal payments, skip payments, quarterly payments (if desired) etc. That is true flexibility.
Most lease financing solutions in Canada are at a fixed rate, but in some cases variable rates are also offered.
When clients ask us what are some of the major challenges or pitfalls of equipment leasing and financing we advise them that questions can be answered in a very simple manner – business owners need to focus on which benefits of lease equipment financing appeal to them and then work with a partner who can deliver optimal rates, terms and structures based on your firms overall credit quality.
The challenge for Canadian business is working through the plethora of hundreds of equipment finance firms, many of which may not be suited to your type of asset acquisition and your firms overall credit quality. In Canada rates on equipment leases depend on the size the of the asset, the financial strength of the leasing company (they borrow money too!) and the overall credit quality of your firm. Leasing when it comes to pure interest rate focuses on your ability to generate future cash flows to make the monthly payment.
Thousands of leases are written every year in Canada for commercial, industrial and construction equipment when the historical cash flow of a customer does not necessarily reflect the future ability to pay. In that case the lease becomes what is known as ‘structured ‘, which simply means that a down payment might be required, the term of the lease might be shortened, and in some cases some additional collateral might be required Lease firms are in business to write leases, so usually every effort is made to complete a transaction that makes sense for all parties.
We advise customers to work with a credible, experience and trusted advisor in this area who can help your firm navigate the occasionally complex world of equipment financing in Canada. When you are successful you will have benefited from one of the great financing strategies of Canadian business – improved cash flow, prompt approvals, flexible payments and potential tax and accounting benefits. Those are great reasons to lease finance your assets.