Equipment leasing in Canada is based on the premise that your business requires financing to acquire new assets to stay competitive and profitable. Business owners and financial managers in Canada who understand that the majority of assets they purchase depreciate in value understand why lease financing works.
Lease financing in Canada involves the acquisition on your behalf, by the lessor, of equipment you wish to use in your business. Almost any type of asset, tangible, and sometimes intangible (i.e. software -) can be leased.
How does lease financing work? It’s quite simple. The lease firm purchases and owns the equipment and ‘rents ‘it back to your firm over a specified period of time. Typical lease terms in Canada are more often than not 5-7 years.
There are a variety of key benefits associated with lease financing – one of them is simply ease of acquisition. For transaction under $ 50,000.00 most lease financing is adjudicated and approved on an application only basis – i.e. no disclosure of financial statement required. Generally leases for more than this amount requires a more thorough application, often including your financial year end statements and perhaps an interim statement update also. In lease financing its all about cash flow, so your firm should be able to demonstrate a proper mix of historical, present, and future ability to make the monthly payment.
So yes, lease acquisition financing is a very simple process. We advise clients that wish to lease that the true challenge in lease financing in Canada is actually structuring your lease properly with respect to the type of lease you choose.
At the end of lease you wish to fully understand what your rights are wit respect to purchasing the equipment, purchasing it for a ‘ fair market value ‘, or in many cases, extending the lease because the asset still has value to your firm with respect to its ability to generate profit for your firm .
The other good news re lease financing in Canada is simply that it’s available for businesses that are in every stage of growth, from start up to major established corporations. Quite frankly, as is the case in a lot of banking scenarios transactions for smaller or start up firms are based significantly on the credit history and business experience of the owners, so Canadian business owners should be prepared to demonstrate the proper credit history and business acumen.
There is no limit to the amount of financing that is available in Canada for lease financing. During the economic crunch of 2008 and 2009 many lease firms actually got assistance from the government to keep the wheels of lease financing moving. Markets have stabilized and funding is generally as abundant as it ever was for the right types of assets and credit quality.
In summary Lease financing is very simply and has clear benefits. As we noted the challenge is in getting approval for the right transaction in terms of credit approval, rate, and overall lease structure. Speak to a credible, trusted, and experienced advisor in this area to ensure you are making the best use of this valuable Canadian financing strategy.