Businesses in Canada are clearly experiencing a great deal of stress and uncertainty in the face of COVID-19. Operational uncertainty, lower revenues and even shutdowns have created a cashflow nightmare for businesses both large and small. The negative effects of the pandemic not only impact a business’s ability to make money, but also their ability to borrow money the same way they were pre-COVID. The exception to this of course, has been one of the biggest taxpayers backed co-signing programs in history – the federal loan guarantees programs through the banks and quasi government lending institutions. The big question in front of many businesses now is how to reinvent and succeed in the new reality. The entrepreneurial drive to be relevant and grow remains but the challenge is where will the ‘new’ money come from to re-tool, replace and upgrade assets. How will your businesses access capital after the programs dry up and banks go back to their normal stringent lending practices – especially if you have a bruised balance sheet from the battles you have been fighting to keep things moving. The good news is that “leasing” is a financial product that can help you get back in the driver’s seat once you have a plan. There is sound reasoning behind leasing as a means to purchase equipment in every business cycle but this type of financing really shines in times like these – when a business has to take on risk to survive and get back to growth. Here are 4 reasons leasing may be your best choice:
1. Easier Access to Capital
Leasing looks forward – banking look backwards. Leasing companies understand the future impact the equipment you are going to purchase will have on your cash flow whereas banks typically look backward at your financials to determine if they can lend. In some cases, leasing companies do not even need financials under $250,000 OAC.
2. Speed to Market.
Related to the previous point, while the bank is taking time (sometimes weeks and even a few months) to make a decision, leasing companies can approve financing as quick as a few hours with total deal turn around typically under two weeks. Every day lost is money lost – leasing will get you making money faster.
3. Stability and Control.
Once a lease is signed there are no reporting requirements or financial tests that must be met to keep the lease in good standing. Compare this to all bank loans that are subject to reviews and acceptable financial ratios and tests leaving business owners exposed to credit lines being reduced or loans called. A lease is the most stable way to finance equipment – stay focused on running your business.
4. Maximize Cash On Hand.
Cash is a scarce resource for most businesses. Leasing often presents up to 100% financing leaving precious cash on hand for the most urgent items or to keep away for a rainy day. The finance amount can even include soft costs such as installation, delivery and specialized configurations (i.e. software, attachments, warranties, etc.).
5. BONUS REASON – More Lender Options.
I know this blog said 4 reasons so this one is the bonus option but may be one of the most important. The good news is that business owners do not have to be tied down to one institution or bank when it comes to debt and financing options. There is always a lender who will find your business desirable regardless of your situation – and in fact, there might be a few lenders you need to work with at once. A professional finance brokerage has the lenders available and ready to compete for your business. See What We Finance.
Talk to one of our finance specialists today for a free consultation to see if leasing is right for you!