Equipment Financing in Canada is a specialized type of financing. Lease financing on its own goes back hundreds of years and is a widely accepted financing tool. Major companies in Canada utilize lease financing, why shouldn’t your firm.
Lease financing covers all sorts of equipment – that includes production equipment, transportation equipment, machine tools, computers, etc. In general most Canadian banks do not offer lease financing, although two of the Chartered banks have dedicated lease operations but require a very high quality credit quality.
You should consider leasing because it’s a simple to arrange financing agreement between yourself, your vender of the equipment, and the lessor. Leasing should not be considered complicated, however Canadian leasing practices and the parties that participate are much different than in the U.S…. It benefits Canadian business owners and financial managers to ensure they understand why leasing is so popular.
Two basic types of leases are available for the Canadian business owner – they are capital and operating leases. Operating leases are often promoted by manufacturers or vendors and they often include maintenance and insurance. You should consult with an Equipment financing specialist to ensure an operating lease is right for your firm. The essence of an operating lease is that your intent is to use the equipment, but not to own it. When you enter into an operating lease ensure that you have no intention of owning the equipment at the end of term. In this case your payments will be much lower than if your intention is ownership, and you will have the benefit of some balance sheet improvement, as this lease is not shown as debt on your balance sheet. The alternative lease is a capital, or financial lease, which denotes ownership.
We can’t over emphasize the need to work with a trusted, experienced and credible advisor in this specialized area of financing in Canada. Seek out a professional that will assist you in acquiring the equipment you need and answer any questions you have about the proper rate, term and structure that your firm deserves based on overall credit and asset quality. Equipment can be new or used, and a good lease financing specialize will be pleased to assist you in maximizing the benefits of lease financing, which include:
- Better use of working capital
- Often cheaper than a term loan
- Wont restrict your current banking arrangements
- Payment flexibility
- Fixed rate financing in today’s low interest rate environment.
Specialists in any industry are a benefit. Consult a lease financing specialist for your asset acquisition needs.
