Business Equipment Financing, including computer leasing, telecom equipment etc is the method by which some of the most sophisticated and largest companies in the world use to acquire technology.
If you are an informed business owner or financial manager you can use some of those sophisticated options for your acquisition needs.
Let’s cover off three critical things you need to know to give you the edge on computer and technology financing. These are:
1. The type of lease you choose can dramatically affect the financial and technological aspects of your acquisition
2. Software and soft cost can be included and financed!
3. Your end of term options choices need critical evaluation – now
Today’s rapid changes in computers, telecom equipment and other technologies require of course that you stay ‘leading edge ‘. Naturally there is a cost to acquiring the newest and the best. In our first point we ironically are encouraging you to immediately start thinking about the ultimate use and benefit and value of the equipment. To do this you need to have the basics on two types of leases. What are those two types? They are ‘Capital’ and ‘Operating ‘.
How can we more clearly define how you should think of those two types of leases? It is simple – As a Canadian business owner or financial manager you want to ask yourself two questions – Do I want to use this asset and return it when it’s reached its useful life, or do I want to own it at the end of the term of my lease. The industry puts many technological, financial, and marketing spins on these two choices, and this is where business people get confused, so simply focus on two words, use or ownership.
If you wish to own the assets – i.e. computers, telecom equipment, high tech business equipment for your production, printing presses, etc, then you should focus on a capital lease. At the end of the term of that lease you will own the asset. The reality though is that technology changes rapidly – our most obvious example is computers. As such you want to seriously consider returning the equipment at the end of the lease. That will more often than not lower your cost, and in some cases have huge financial benefits around your balance sheet and operating expenses and taxes.
Our second point, i.e. our critical tip # 2 is that you should full understand that most soft costs, example – software – can be included in your purchase. Software can be financing, which many business owners and financial managers either didn’t know or didn’t consider. In today’s environment hardware assets tend to be more of a commodity and it’s the soft costs and software that are the true drivers of technology. The costs of software and other related items to our business equipment acquisition can be staggering, so consider bundling the soft costs into your total solution.
Lets move on to our final point – which is putting some solid care and decision making into what will happen to your asset at the end of the term of your lease . When we say term we simply mean that is the amount that you desire or agree on to financed the equipment acquisition. Typical terms are 3-5 years – however terms for 2-7 years can sometimes be negotiated depending on the dollar value of the asset, the type of technology you are financing, and your firms overall credit quality .
If you choose the more ‘ sophisticated ‘ approach to technology financing – i.e. our operating lease option, then you have automatically given yourself 3 choices for end of term decisions . And it is you, not the lessor that makes those choices, thereby empowering you to drive the true value of the acquisition. Those choices are return the equipment, upgrade the equipment, or purchase it for fair market value if you still fee it has a useful economic life.
Speak to a trusted, credible, and experienced lease financing advisor to determine which options most suits yourself, and you will also get assistance in walking your firm confidently through the sometimes turbulent technology financing maze.