Turn your equipment into cash savings – now…and, you’ll continue to both own the equipment and use it at the same time. Securing assets to loans is ancient history…the beauty of it though is that you can continue to go back to the proverbial well with your quality equipment both producing product and revenue for your business while you negotiate a debt deal security.
For instance, a private Co. is a start-up Master Packaging Provider to the mfg industry. This Co. invests $750,000 on a multi part packaging line. In order to obtain equipment financing they must qualify for it first – this is our entry point into this business venture by the way. Once all the financing has been put in place (debt and lease financing is our specialty) the wheels are put in motion and the company secures the equipment and starts their regular monthly payments. Fast forward… the Co. has continued to grow over the following 3.5 years, paid their bills on time and now see themselves as a potential borrower once again by looking to invest in a much needed second packaging line. Great, the financiers are gung ho. It’s only been a short time period since start-up so anyone in finance knows this isn’t a going concern that has enough history to secure itself in the marketplace therefore they still come with quite a bit of risk – ease of entry into the market by competitors, copy-able and, the forecasts ahead are ‘steady’ not in an early growth stage. So what will this Co. do for financing?
Glad you asked…if it was a no-brainer and the cash flow now supported the loan, contracts and PO’s were all long-term and in place, they can lease the equipment with little investment. Leasing is one common funding method and is great – provides for lower monthly outlays and postpones a material amount of the debt into the future. The normal negative side is the cost to borrow – this Co. may be in for rates anywhere between 8-18% without any additional security. Even if the cash flow supports this acquisition, is this deemed the most ‘cost effective’ method of debt financing for this Co.? Again, another great question…you guys really are a terrific audience, thank you.
Lien the existing line to the lessor (sale/lease back which should be noted provides for proportionately lower financing amounts compared to lease financing on the full market value. ) and reduce their risk while optimizing the capital structure and tax benefits, hence the Co. will enjoy a reduced monthly total outlay to the financing firm. If you’ve cleared the debt security on the current packaging line and it’s completely operational and maintained this piece of equipment may be able to provide you with the best financing monthly rates without the Co. having to invest any new money in the project. How does that sound? Well, since we’ve all come to the same conclusion here, the Co. can just go down to their regular institution and obtain this funding – case closed. In some cases this is possible. But, if you want an experienced equipment financing advisor to review your options and provide the optimum solutions then you are one step closer to reducing your monthly cash flow costs and keeping your Co. liquid while the funders hold the risk. Most controllers have the knowledge to oversee various types of equipment financing, unfortunately not the time or resources to make the best equipment financing deal for the Co. …we do that for you!
Bottom line, they have a choice, so seek out and speak to a trusted, credible, experienced Canadian business financing advisor with a credible track record who can help you facilitate the most cost effective financing that has the right financing firms for your projects.