Tag Archives: Leasing

5 Most Common Equipment Leasing Mistakes

Equipment leasing is often a crisis most finance executives have to deal with, more so, to reduce the cost of end-of-equipment lease buy-outs. Leasing experts known to offer effective, analysis-driven and rapidly-deployed end-of-lease costs reduction services are suggesting there are common mistakes companies’ senior level finance personnel might want to avoid to reduce lease costs from inception to end-of-lease.

· Not being mindful of all the equipment leasing options available. The lack of complete information about what leasing options that can be a fit for a company can hinder a company’s capacity to change with its industry. The goal is to get the equipment needed, when needed, and in a way leasing costs can be accommodated by the company to continue to grow. There are, for instance, seasonal industrial equipment financing programs and payment deferred programs a company should be made to be aware of.

· When heavy equipment financing selected not a match to a company’s cash flow. Companies do often have swings in income generation. For most companies production targets are seasonal, therefore, selecting industrial equipment leasing that allows making interest-only payments during the down swings can keep company leasing costs sustainable as possible. There are programs also for a company bringing in larger profits during its peak season to make larger payments. And paying out the financing as early as possible is another possibility for a company to reduce its lease costs.

· Not having a company’s business plan, finances and statements in order. When senior level finance personnel bring to the lease negotiations the company business plan, finances and statements; that as such empowers a good industrial equipment leasing company to better determine how much the company can afford and what equipment financing program that works best.

· Poor choice of a financial provider. A senior level executive for company leasing equipment is well served only by having experts that leverage rigorous analysis and vast experience to deliver the savings the company needs for growth. A provider who secures better rates with various options together with good customer service can make the lease inception process to end of lease as easy and effective as possible.

· Not acquiring the equipment needed. When a company leases equipment that is outdated or equipment that lacks the features the business requires, it constrains a company’s growth. By equipment leasing a company should be able to address the problem of obsolescence. To obtain equipment that may be outdated in a short period of time should be in a manner that the lease should pass the burden of obsolescence onto the lessor.

These are just a few critical oversights senior level financial executives should be mindful of to save them a significant amount of time and lease costs. Companies that are well supported with the structure and capacity to track the all-in cost of leasing and are aware of the risks and costs of leasing are always better prepared to deal with any unexpected lease costs especially when a company decides to stop leasing or switch lease vendors. Always a viable strategic approach for a company to understand the full cost of a lease program, or the leasing-based financial and operational risks they are running on an ongoing basis. Expert advice is thus key to set up lease programs properly and to minimize or eliminate unexpected costs and risks. Senior financial executives are better served when leasing experts share critical data about the lease portfolio’s performance and risks and are helped to develop and implement applicable risk and cost mitigation strategies.

Commercial and Industrial Equipment Leasing Solutions

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.