“Refinancing Equipment Through An Equipment Leasing Facility Is Common Place In Most Industries”

The process of refinancing existing equipment that has either been paid for in cash, or has had a loan or lease against the equipment which is now paid off, is most typically done through an equipment leasing process known as a sale and lease back.

The other equipment refinancing scenario would be when equipment has a current lien or charge against it and you wish to get a new loan or lease in place to pay out the existing charge, plus potentially provide additional capital, assuming that there is enough equity in the equipment to justify an increased borrowing or leasing amount.

Under this second scenario, a sale and lease back option is still going to be the most common form of equipment refinancing in most situations.

With a sale and lease back transaction, your existing assets you own, or the assets that you are leasing that are owned by another leasing company, are sold to an equipment leasing company that is prepared to finance your used equipment for an agreed up amount, rate, and lending term.

Most equipment financing companies have a standard rule that if you have purchased an piece of equipment for cash or self financed it, you can readily apply and receive an equipment loan or lease up to 6 months after the date of purchase without much issue.

This is because most financing companies consider an asset purchased within six months to be new and apply their financing criteria accordingly.

But once an asset is owned or leased for more than 6 months, additional lender and funding criteria can come into place before you will be able to come an equipment refinancing transaction.

Refinancing Equipment Can Require You To Meet A Higher Lending Standard

If you’d like to get the best available rates, or close to them, from an equipment refinancing transaction, then you’re going to have to prove to the lender through your financial statements and credit profile that purpose of the transaction is to fund growth or restructure the balance sheet in a stable business operation.

If the business is in financial distress, it is unlikely that “A” lenders are going to consider providing an equipment refinancing facility.

In cases where additional cash is required and the business is not financially stable, the borrower or lessee will have to consider “B” or “C” credit options which fall more into equity based lending whereby the lender will assess the market value of the asset based on a forced liquidation appraisal and provide a percentage of that value in the form of a loan or lease.

The rates for equity based or asset based loans or leases of this nature are considerably higher than “A” lender rates and are only provide for one or two year periods, allowing the business time to either improve their financial position so they can qualify for lower rates, or sell the assets off under orderly liquidation in order to preserve their equity.

Canada Has A Wide Range Of Equipment Leasing Providers

Equipment leasing providers in Canada are considerable in number and are spread out over the country, some focusing in on certain regions, types of assets, financing amounts, and credit or risk profiles

The highest concentration of equipment leasing companies in in the province of Ontario where there are head offices for both national and regional entities that provide lease financing.

While there is considerable representation by equipment leasing providers all over the country, Ontario has considerably more leasing options due to the large business population and the concentration in manufacturing and construction which lends to large capital requirements for businesses in these industries.

Regardless of where your business is located in Canada, the equipment leasing providers will be broken down in different classifications to further describe where they fit into the market and the leasing benefits each provides.

For instance, most equipment leasing providers fall into what we call the small ticket financing, where the majority of equipment leases they provide will be under $100,000 with a maximum of around $250,000.

Small ticket leasing companies also tend to be quite diverse in nature as their risk is somewhat restricted to the lower dollar amounts they are dealing with.

For the larger financing requests, there tends to be more concentration in certain types of assets due to the need to manage the risk of default on larger financing facilities.

Equipment Leasing Providers Occupy Many Different Market Niches

In order to be more unique in the market and to develop some degree of competitive advantage, there is also a fair bit of specialization in the market among leasing companies.

For instance, there are certain companies in both the small ticket and larger ticket segments that will focus more on businesses with some combination of distressed cash flow and credit.

These companies are typically closely aligned with auction houses and liquidators in order to be able more effectively deal with the high risk of default that comes with more distressed lending scenarios.

On the other side of the equation are the bank leasing divisions that provide equipment leases at very good rates, and in many cases, better leverage than their own small business financing arms, provided that a given business can qualify.

With all the different potential options to choose from, the best approach a business owner can take towards securing lease financing from an equipment leasing provider is to work with an experienced equipment leasing broker.

If you have an equipment leasing requirement right now, or are just planning ahead, we suggest that you give us a call and we’ll make sure you get all your questions answered right away.

“Using Equipment Leasing Recourse To Increase Sales”

If you’re an equipment dealer or equipment reseller, your number one goal is to sell more equipment, right?The biggest barrier to equipment sales, especially with bigger ticket items, is your customer’s inability to get the equipment financing or equipment leasing from a third party financing source  to close the deal.

If you resell used equipment only or used as well as new, then offering the lender some form of recourse can be beneficial to you in a number of ways,

First, of all, what is a recourse agreement?

In simple terms, if the buyer defaults on the financing arranged to acquire a particular piece of equipment, the dealer agrees to buy the asset back at a predetermined price or a price that will be determined by a predetermined formula for setting it.

The proceeds from the sale go towards paying down the lender or leasing company debt and the asset is added to the dealer inventory for sale.

How Can Equipment Leasing Recourse Benefit Your Business Profits?

There are two main ways that a recourse agreement can benefit you as a dealer.

The first and most obvious way is that more customers are going to be able to qualify for financing which is going to result in more sales and more profits.

The second benefit of recourse agreements are that they can provide a low cost source of used equipment inventory that can be resold for additional profits.

Let’s look at an example.

An equipment dealer enters into a recourse agreement with the financing company whereby in the event of default the dealer agrees to purchase the equipment back from the leasing company for 50% of its initial cost during the term of the lease.

Say the lease term is 3 years and the dealer is very confident that the equipment will be worth more than 50% of the purchase price at the end of the lease term.

Because of the borrower or lessee’s difficulty securing credit without recourse, the lender or leasing company asks for a 25% down payment.

The recourse agreement reduces the lessor’s risk of loss to 25% and if the lessor makes their payments for at least one year, then no loss can be incurred.

In the event of default, the dealer acquires the asset back at potentially a below market price and puts it into inventory to resell.

The dealers risk is in the actual market value of the asset in the event of default which places the profit margin from the original sale at risk.

But considering that default is likely only going to happen occasionally, the dealer has made more sales through recourse and banked the related profit margin from the additional sales.

Again, this is a very oversimplified example as there can be almost an infinite variety to potential recourse agreements.

But the point remains that if done right, an equipment leasing recourse agreement can increase both sales and profits

Equipment Lease Brokers Help You Locate And Secure Equipment Financing For Your Business

An equipment leasing broker is an individual with an existing working relationship with equipment leasing companies that provide equipment financing to various business entities.

As leasing brokers, our job is to understand your equipment leasing requirements as quickly as possible, help you put together an application package suitable to specific leasing companies, and then submit that information on your behalf to the leasing companies that meet your requirements and fit your credit and financial profile.

After the submission is complete, we work back and forth between the leasing company and your business to make sure all questions get answered and unnecessary administration delays are eliminated so that a credit decision can be made as fast as possible, hopefully in your favor.

If we can’t identify a solution for your specific request, we will tell you right away so that we’re not wasting any of your time trying to locate suitable funding.

Equipment Leasing Brokers Provide Tremendous Value To Their Customers

First of all, most business owners are busy and perhaps do not require financing, specifically equipment financing, all that often.  Working with a broker allows you to outsource the process to a professional that is going to be more efficient at getting financing in place quickly.

Second, like other types of financing brokers, an equipment leasing broker has access to the broader market, allowing you a higher probability of getting the best available deal, versus making applications to one lender at a time that may or may not be a good fit for your requirements.

Third, once a lease is in place, an equipment leasing broker will remain as a resource to you if there are any administration issues related to a lease they have placed for you or if you’re planning for a future equipment acquisition where financing is going to be required.

If you are in need of equipment lease financing and want to know more about how we may be able to assist you with your financing requirements, please give us a call and we’ll get all your questions answered as quickly as possible.

Does Your Business Need To Vendor Leasing Program For Your Customer Equipment Purchases?

It can go by many names, but a vendor leasing program or vendor financing program is a pre-qualified financing opportunity for your customers who are going to require financing or want to utilize equipment lease financing to complete their purchase from you.

A vendor program basically means that the seller has gone to a leasing company or consultant, provided a detailed profile of their company, product offering, and profile of customer so that the leasing company can quickly assess and hopefully approve financing for their customers.

While a vendor or dealer leasing program does not guarantee a customer financing, it does greatly speed up the process of trying to secure financing by having a pre-qualified and highly relevant lender or leasing company receive an application for financing for equipment they are already comfortable with, provide by a vendor that they believe is financially stable and able to support customer sales transaction.

The best vendor financing or vendor leasing programs tend to be the ones that are run through equipment leasing specialist who have relationships with enough leasing companies to cover off the spectrum of credit that may occur in your customer base.

By sending customer deals through an equipment leasing specialist that has already pre-qualified the assets and vendor with a variety of lenders, the customer is more likely to be working with the right type of leasing company faster, increase the probability that financing can be put in place in time to close the sale.

Vendor financing program through equipment leasing companies is very common in North America, especially for vendors that have large product lines, ahigh volume of sales and customers requiring credit.

Get Vendor Equipment Leasing That Meets Your Business Needs

That being said, vendor financing can also be set up for a single product company.  But the key to any vendor financing program is going to be regular sales volume that makes it worth the leasing company’s time to provide more specialized attention to any particular vendor versus business applications received at large.

In order to set up a vendor financing program, the seller will likely have to have been in business for more than a year and have a track record of completed sales without any significant after sale issues.

Further, the more the item or items being sold can be considered to be a commodity, the more likely vendor financing can be arranged.  Failing that, the seller will have to be financially stable in order to deal with remarketing and repurchasing requests that the leasing company may have.

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