If you have made the decision to contact equipment leasing companies in Canada you probably already have some sense of the advantages of commercial equipment leasing . How do you ensure you can get approved and also successfully negotiate the leasing benefits that are most important to your firm . Lets explore some money saving and time saving tips on equipment finance in Canada .
Just knowing which type of lease you need or that makes sense should be strategy number one – its not a complicated minefield of lease types – there are only two types of leases you should be looking at . The technical term for these two leasing types is capital lease, or operation lease . Which one makes sense for your firm? To make that decision simply focus on the end means – ask yourself this question – ‘ Does my business ultimately want to own this equipment, or are we more focused just for using it to generate revenue and profits for a specific period of time ?” That specific period of time might also have to do with the technology you are acquiring that down the road might be outdated or require enhancement or replacement .
So the simple rule is as follows – Negotiate a capital lease for equipment you want to keep and own, and negotiate an operating lease for commercial equipment you want to use and return . Equipment leasing companies may or may not offer your type of lease, so understand the overall market for your type of transaction .
What many Canadian business owners and financial managers don’t understand is how the pricing of a lease if reflected in both the type of lease you acquire, as well as the overall lease structure .
Example : If you firm is leasing a smaller ticket item leasing companies sense that you are more aware of the monthly cash flow and payments you are required to make . As a result the lease company can significantly adjust their rates based on your negotiations around which payment you feel you could make on the lease . A monthly payment of $ 515.00 is required for a 5 year capital lease of 25,000.00 of equipment . If the lessor tells you the monthly payment is 575.00$ per month they have just raised the rate to 14%. So focus on a combination of rate and monthly payment in your negotiations and understand how those fluctuations work .
Clients are always telling us they choose leasing financing as an options because of the focus on cash outflow . However , you should understand that often a down payment or a first and last payment might be required, so factor this type of negotiation into your lease negotiations .
It is important to get a commitment letter that spells out the overall lease payments and structure, and identifies both yours and the lessors obligations for a commercial equipment lease .
It is of course ok to get a competitive quote from another party, the challenge we find is simply that many clients aren’t capable of making an apples to apples comparison to the different rates and options provided . Ultimately as Canadian business owners we prefer to rely on an expert when we deal with any part of our business, including the crucial area of financing . As a result seek out a trusted, credible and successful business financing advisor who can assist you in a success commercial equipment lease financing transaction . This makes even more sense when a larger amount of capital expenditure is required .
If you do choose to work with an expert you will find that you might be saving many thousands of dollars on issues that might involve prepayment obligations, insurance coverage required, upgrade options, equipment registrations fees for collateralization of the lease, and assignment priveliges of both parties . So the bottom line again appears to be that consulting an expert in this area of business finance is highly recommended .
Make equipment financing a successful part of your overall capital expenditure strategy – focus on benefits that make sense for your firm, pick the right lease type, and ensure that the overall terms and pricing match your firms needs . That’s successful commercial equipment leasing in Canada.