Thursday, May 10, 2012

Make Equipment Leasing Your Asset Financing Choice. Liquidity 101 With Lease Finance In Canada

Equipment leasing in Canada. As a business owner or manager you prefer to maintain or enhance liquidity, as opposed to cash outflow. Inflow is good, and that's why asset financing via lease finance continues to be Canadian business's method of choice for financing assets.

More sophisticated and larger companies spend a lot of time on areas such as ' cost of capital ' and equity versus debt scenarios. The SME business owner in Canada, probably, on the other hand just wants to know that he or she is conserving cash when it comes to fixed asset financing. It's as basic as that.While some analysis by either segment of business in Canada (smaller firms / larger companies) may show that a lease might have a higher financing rate as opposed to a loan or cash acquisition the focus preference of most is pretty simple - extra cash flow!

You certainly don't have to be a sophisticated financial analyst used by the larger corporations to grasp the fact that the extra cash flow and working capital you save by making a lease payment over time can be reinvested in your company to operate and grow your business.

So, yes, if your bank line is at 6% and your lease rate is at 8%, as an example because your company can use funds not spent to maintain cash liquidity.A typical lease payment in Canada has one or two payments in advance, sometimes called a ' down payment ', or ' security deposit '. A loan scenario might easily involve a 10 - 20% deposit, while at the same time having potential negative tax implications for your firm.And while yes of course it's all about ' cash ' being ' king' other aspects such as a longer term and residual lease structures also make asset financing via lease finance preferable.

Private, non public companies need to always maintain a strong focus on their overall capital structure, but they don't really have the same focus as public companies who are generally obsessed with debt to equity ratios because of their public persona and shareholder concerns.We must also never forget that some companies simply can't obtain proper asset financing because of their overall credit situation.

That's where lease structuring comes in, and more often than not a transaction can be structured with some creative solution that ultimately leads to financing and credit approval.It's no secret that over 80% of North American firms (we guess that includes Canada!) utilize equipment leasing for their business needs.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your lease structure needs.

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