Construction Manufacturing Equipment Financing plays a huge role in the Canadian economy. Business owners and financial managers such as you want to ensure they have the best leasing and financing options available to them – It has continually been proven that financing equipment via leasing is a very cost effective option.
One of the many important features of such a financing is the ability to match his term of the lease with your expected use and residual value of the equipment. Generally equipment lease financing for used and new manufacturing equipment can be arranged for terms varying from 3 to 5 years.
No one knows better than the business owner what the useful expected equipment life of the asset will be, and we encourage clients to match the term of the lease financing transaction with the economic life of the asset. The reality is of course that construction manufacturing assets have significantly longer useful expected values – (as compared to assets such as computers!)
We encourage clients to work with a trusted, credible and experienced lease financing advisor. The benefit of such knowledge can save you many thousands of dollars based on the overall rate, term and structure of your lease transaction.
There are of course other financing options when it comes to the acquisition of such assets – those options could include a government small business loan or a term loan from a bank. While these might have a lower rate to the overall transaction they come with much more stringent credit criteria – heavy emphasis is placed on the balance sheet and income statement of your firm. Leasing in general places a larger emphasis on the expected value of the asset during the term and at the end of the lease.
Many customers don’t realize that some of the additional costs that relate to the acquisition of used and or new construction manufacturing equipment can also be financed – these include maintenance, installation, shipment, etc. That’s a huge cash flow and working capital benefit.
In certain cases your firm might already own such assets and you might want to consider leverage them through a sale leaseback for additional cash flow and working capital. That is a very solid financing strategy that many firms have taken advantage of over the last year, as cash flow and working capital availability tightened significantly during the global credit crisis of 2008 and 2009. Owners simply adopted a strategy of leveraging their equity in assets to stay liquid and competitive.
Many financial mangers simply view lease financing of such assets as a solid cash flow strategy, you minimize payments and match them to the overall benefits of the equipment you are acquiring.
Seek a trusted advisor. Focus on which benefits of lease financing are most important to your firm. Structure and acquisition that makes sense form a cash flow, rate, and term structure based on the value of the asset and your current financial condition. That is solid business planning for growth.