Lease finance decisions in Canada seem to be pretty common place in Canada these days when Canadian business owners and financial managers are financing equipment assets for their firm. It couldn’t be more basic, paying a leasing company for the use, and potential ownership of business assets. But wait! Just how important are some of the implications and financing decisions around this popular method of business finance.

Let’s look as some of the positive implications of equipment finance in Canada, while at the same time pointing out some of the potential pitfalls, because there are a few if you’re poorly armed with the right information.

It pretty well always starts with the reasons that the business owner/manager looks at when acquiring new business assets. And those reasons? They are:

Convenience

Risk

Tax/accounting

Financial Need

In many cases the financial need simply comes from the large cost that might be associated with any new business asset – for example a new computer and software system for your firm, the intent being to make you more ‘ competitive ‘. And as in all scenarios associated with cost the ability to arrange competitive financing quickly and to the terms you need drives the final leasing decision.

They are probably not given enough of their due for this, but we shouldn’t forget that the leasing company is assuming both financial and asset risk when they finance your transaction, so finding a lease company partner with the right… shall we say .. attitude about helping you out is a good thing!

Using our example of a technology need the whole issue of technological obsolescence is key when it comes to lease finance. These assets tend to depreciate quickly and also change, seeming everyday?! when it comes to what’s in and what’s hot.

Your accountant will tell you that there are all sorts of tax and accounting benefits, and as we said, sometimes implications involved in the leasing of an asset. They include depreciation, budgetary issues, tax, etc. The larger your equipment lease is the more implication some of these issues might have, so we advise clients to never forget to address what might be the boring stuff to them!

Both you and the lessor should consider the issue of maintenance and insurance on leased assets. For the lessor it’s protecting the financial risk in their transaction. Remember the lease company is a financial partner, not an operating partner, so maintaining the assets you lease is critical.

We often run into clients that have what is known as a ‘ pride of ownership ‘ when it comes to acquiring assets. That’s all fine and good of course, but don’t forget that with a properly structured lease you can in fact assume ownership at the end of the lease term, all the while having reaped the cash flow benefits of using and paying for the asset.

So our bottom line today..? simply that it’s worth some quality time when it comes to decision time in Canada for lease financing and financing equipment assets. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with right strategies around this important method of asset acquisition.