How to Acquire Equipment Finance Leasing and the Best Leasing Services and Rates

When Canadian business owners and managers are aware of the benefits of equipment finance leasing and leasing services their ability to get rates, terms and structure approvals that makes sense increase dramatically.

Equipment financing in Canada is one of the easiest methods of financing business assets bar none. However, at the same time the complexity of the different types of leasing and who offers lease financing can be a true challenge that you might not want to dedicate all your time toward.

You can obtain the best leasing services and rates by focusing in on what benefits matter to your firm from a priority basis – in many cases its simply the term and rate on the lease financing. Depending on what type of asset you are financing lease terms vary from 2 to 7 years – at the end of the day it depends on the equipments useful economic life, combined with the type of lease you structured. In Canada that is either an equipment finance lease, designating your desire for ownership, or an operating lease, designating your firm’s choice to use an asset, but not ultimately own it.
Leasing is often referred to as a cash flow enhancer – little or no money down, as well as your ability to craft monthly, quarterly, or semi annual payments with can either accelerate or decelerate as you require. That’s true cash flow management.

Equipment lease financing is all about benefits and use, not real pride of ownership. In most situations today assets depreciate… you certainly can’t look at your investment in computers and technology and make the case those assets are rising in value!

With today’s volatile finance markets, inflation, and the somewhat erratic timing of the need for your asset acquisitions isn’t it a safe bet to know that the decision process becomes much easier when leasing services provide you with an effective acquisition tool.

Clients always inevitably ask ‘why is lease financing so popular ‘? The reality is that is a triple threat to your competition. You can effectively stretch your dollars, extend your budgets, and acquire equipment and facilities with the most minimum investment of funds. That is simply because you are matching investment of your funds with the useful economic life of the asset – what else could make more sense.

Equipment finance leasing allows you to generate the payments you need to make for the asset from income produced by the asset – payments are made from current revenue and the equipment and assets you finance are in effect a ‘pay as it earns’ scenario. Today’s costs are paid with tomorrow dollars since lasing involves payment for equipment as it is used. Naturally if you chose to buy the asset outright we can make the statement that you would be using today’s dollars to hand tomorrow expenses, and we advise against that in conversations with clients.

Speak to a trusted, credible, and experienced Canadian business financing and lease advisor on how you can maximize the benefits of equipment lease financing to grow revenues and profits.

How to Buy a Home Without Bank Financing Using Subject To or Owner Financing Techniques

What is “Subject To”?

Subject To refers to a form of financing where the purchaser buys a home “Subject To” all encumbrances (including but not limited to existing mortgages, back taxes, liens, etc.). Most commonly when you purchase a home utilizing the “Subject To” method, you can expect that the existing mortgage will be what you are taking over. So you would be purchasing the home “subject to” the terms of the existing mortgage, leaving it in place.

This method is used largely in situations where the home seller is unable to sell their home using conventional means or they need to sell quickly. Because there is no need to obtain new financing, the process can be completed very quickly (in as little as 2-3 days). Obtaining a new mortgage is typically the most time consuming portion of the purchase process. You have to go through the entire approval process, qualifying for the mortgage, providing numerous documents, etc. With “subject to” financing none of this is necessary, in fact there is no need to utilize a new bank at all.

Let me outline how this would work in the real world. You must first find a seller that is motivated to sell their home. Keep in mind there are many reasons a seller becomes “motivated”, not all of them are financial. A seller that needs to upsize or downsize can become motivated. Military sellers are prime candidates to become motivated, as often times they are given short notice to relocate. Sellers facing a divorce often become motivated because they just want “out”. Individuals who have received a job offer in another city or state will often become motivated. You get the idea. Be creative and you will soon be able to spot a motivated seller a mile away.

After you have identified your motivated seller, you meet with them to explain what the benefits of working with you to sell their home is. You explain it in the most comprehensive format, which is calling it “Owner financing”. There is very little difference between “subject to” and owner financing”. I will explain this shortly. Everyone has some concept and understanding as to what “owner financing” is. This will help open the dialog and offer a level of explanation. Many times sellers are behind on their payments and you can explain by selling the home to you will improve their credit scores and avoid a foreclosure on their record by taking over their payments and paying on time. If they are not behind, then identify what it is that they are trying to accomplish, and explain how selling to you will help them accomplish this goal (fast sale, highest offer, no need to repair etc.).

After they agree, you need to sign a contract stating that you are buying the home for a purchase price of at least the payoff amount (most times this is an adequate offer). Remember you are offering them a quick sale. The contract must state that you are buying the home “subject to the existing financing”, and that all parties understand that the mortgage will remain in the sellers’ name.

This raises the next most common question I get asked, “If the mortgage is still in the sellers name, how am I the owner?”. I am glad you asked! Much like the title to your car, a deed shows ownership of a specific property. If you sell your car what do you do to transfer ownership? That’s right you sign over the title. Likewise, when a homeowner sells their home, they sign over the deed. The deed and the mortgage are two separate documents. The deed shows ownership, the mortgage indicates who owes the bank money. The bank wants something of value to ensure that they will get the money paid back that the borrower owes. That is why a bank puts a lien on the property (thus the term “subject to” the mortgage). Are you starting to get the idea here? Exciting huh? You can actually buy a home without getting a new loan, paying loan origination fees, or all of the other garbage fees necessary to close on a home with a new lender. So of course you are still subject to fulfill the obligations of the original loan agreement or the bank will have the right to foreclose on the property if payments are not made.

I told you earlier there were minor differences between “subject to” and “owner financing, so let’s go over them now. First and foremost a true “owner finance” would not have an existing mortgage. The seller would own the property free and clear. So really it comes down to who you send the payments to. If the seller owns the property free and clear, you are safe to make payments to the seller. If you are buying “subject to” the existing mortgage, you do not ever want to make payments to the seller. You want to send them directly to the bank so that you know that the payment has been made. Why? Because if for some reason you send the payment to the seller and they decide not to make the payment to the bank, then you risk having the bank foreclose on the home through no fault of your own (except not listening to me!). Secondly with “subject to” the payments, interest rate, and terms are already set. With a true “owner finance”, this would all be negotiable (I recommend you start with 0% financing).

Next, the closing attorney or escrow agent (title company in some areas), is responsible for carrying out the agreements in your contract. You want to work with a knowledgeable, investor friendly agent to perform these tasks. They will do a title search. This is imperative, as this will disclose any and all mortgages, liens, back taxes, etc. Remember you are taking this home “subject to” all of these things. The purchase agreement (contract) is written exactly like any other purchase agreement. You just need to add the important verbiage that directs the closing agent of your wished (see above).

This is an exceptional way to buy a home without obtaining new financing. You do not have to be “qualified” to utilize this method of financing, because the loan has already been issued. All you do is set up automatic payments to go directly to the bank. Everyone is happy. The seller sold their home, you the buyer purchased a home without new financing, and the bank although they are unaware continue to receive their payments and interest (after all that is what they are in business to do). So now that you know an alternate method of purchasing your own personal home or investment properties, there is no need to participate in the so called “credit crunch” Happy buying!

One Real Way To Solve Business Financing Challenges – Asset Backed Lending

Something that works. We all want that. And in the new business financing reality of 2010 and 2011 asset backed lending might be your new choice for Canadian business financing.

Asset based line of credit facilities are becoming more popular everyday. It is simply a newer method of lending to Canadian business with a total focus on assets. ‘Assets’. That’s the key word. So which assets are they? ask clients. Typically these include inventory, receivables machinery and equipment in your fixed assets part of the balance sheet, and in some cases real estate. In some very unique cases IP, or intellectual property, a la patents, etc can be financed.

Another new common category is tax credits, such as SR ED (SR&ED) tax credits. Tax credits are in effect receivables, money owing to you from the government that is in the form of a non repayable type grant. So monetizing that asset as soon as you can allows you to employ cash more efficiently in your business.

Our clients typically imagine inventory and receivables as being the only items they could margin for liquidity with their bank. The reality is that even inventory financing is becoming more difficult in the chartered bank environment, certainly for start up, smaller, and medium sized firms. That therefore is the main difference in an asset backed lending and working capital facility; in its simplest form it’s simply the margining of all those other assets to capture maximum liquidity.

So who is actually using these types of cash flow facilities, and why are they a very solid alternative to what is termed ‘ traditional’ bank financing. (We’re not so sure these days that ‘ traditional’ bank financing is as available as it used to be – what do you think?!)

The truth is that this type of Canadian business financing is an alternative to bank financing, its real, its available, and allows you to not having to consider more unpalatable options such as raising new equity and diluting your ownership.

We are all for secured bank lending… if you firm can qualify for all the lending it needs. But if you have had financial challenges then consider asset backed lending as a solid option. What are some of those ‘ challenges’ we speak of that might not allow you get Canadian chartered bank financing… its issues such as a temporary loss, a turnaround, new ownership, balance sheet ratios and covenants that might not work for the bank, etc.

Asset based finance does not really care about all those issues – yes they are discussed, but it always comes back to ‘ the assets ‘ – and if you have them you can margin them on a daily basis for working capital and cash flow.

So whats the catch. While we feel the advantages of asset based lines of credit far outweigh the alternatives, the reality is that 95% of the time this type of financing is more expensive. It also requires more reporting on an ongoing basis, although most business owners we talk to will gladly pay more finance charges and are OK with reporting if they in fact have all the cash flow they need to grow and profit in today’s competitive environment. You can also expect a bit more due diligence on your overall asset quality when you set up the facility.

There is always a bottom line in business, and in our case today it’s that an asset backed line of credit facility is a new and emerging working capital financing that provides your firm with all the liquidity to grow. Speak to a credible, experienced and trusted Canadian business financing advisor to determine if this type of working capital and credit facility benefits your firm.