Asset Leasing In Canada. Equipment Finance Companies in have, for whatever reason some myths and plain old bad information associated with who they are, what they do, and what benefits the Canadian business owner and financial manager derive from the use of equipt. financing. Let’s dig in.
Myth # 1 – Everyone’s doing it! Actually that one is close to 80% correct because experts tell us that over 80% of businesses in North America (hey that’s us also!) utilize business leasing to achieve asset acquisition. We can’t speak for the other 20% – hopefully they are your mis-informed competitors.
Myth # 2 – A lease is kind of like a loan right? Not really, although bridge loans, term loans, conditional sales agreements, etc are asset finance transactions a lease is not a loan. Accounting, tax and other issues make lease finance a uniquely special proposition when you’re acquiring assets.
Myth # 3 – Only certain assets can be financed. That’s definitely not the case, as almost any asset, tangible or intangible (software is a good example) can be financed. The flexibility and creativity that goes into non standard asset financing is significant.
Myth # 4- There is only one type of business lease. That one is definitely not true, as in Canada the business owner/financial manager has the option to utilize a ‘ capital’ lease to own strategy, or alternately, an ‘operating ‘ lease to use finance choice. It really depends on the type of asset you are financing, its long term use to your firm, and its value. Oh and by the way, within those two basic lease option structures your company has the ability to structure payments that make the transaction more beneficial to your firm.
Myth # 5 – A lease company is a lease company, right. Not so fast! There are all types of lease companies in Canada – while they are segregated generally into small, medium and large ticket lessors they in fact range in size and geographical focus. The industry is made up of independent commercial lease companies, bank entities, and insurance companies. And ownership can be Canadian or U.S. based. Just knowing what leasing company to deal with for the assets your are financing is worth its weight in gold when you factor in time spent, interest rates, structures offered, and credit approval criteria .
Myth # 6 – The main benefit to asset financing via a lease is the 100% financing and fixed monthly payment. While that is of course true, there are numerous other benefits to asset financing under a lease structure – they include hedges against asset obsolescence, the ability to upgrade assets, tax and accounting benefits, cash flow management, etc .
Myth # 7- There are no risks in leasing. We wish we could say that is true, but in reality any aspect of business always has risk and some of the potential risks in lease finance include loss of asset values, repossession for non payment /default , risk of asset loss, insurance obligations,etc. The good news is that a properly structured lease, with the right partner firm or advisor can mitigate significantly, or entirely all those risks.
There you have it. Our debunking is complete. Seek out and speak to trusted, credible and experienced Canadian business financing advisor who assist you in setting the record straight on equipment finance companies and asset leasing in Canada.