Lease financing is an advantageous method for businesses in Canada to acquire necessary equipment without immobilizing significant capital. This alternative to traditional purchasing, often associated with competitive interest rates, transforms direct purchases into manageable payments aligned with the company's revenues.
By choosing lease financing, you avoid large initial expenses while gaining immediate access to the equipment required for your operations. This financing solution preserves your resources for other aspects of your business development. Additionally, in terms of financial management, lease financing often provides tax benefits, such as the deductibility of payments as operating expenses.
This detailed guide offers key steps to prepare your lease financing application.
Tip 1: Check Your Credit Report
Consulting your credit report before submitting a lease financing application improves your chances of approval.
Obtain this report from relevant credit agencies. Review it for any errors or inaccuracies, such as payments incorrectly marked as late or accounts that do not belong to you. If anomalies are present, contact the credit agency to correct them by providing the necessary documents.
Correcting these errors improves your credit score, demonstrating responsible financial management to lenders. This verification facilitates the approval of your lease financing application.
Tip 2: Analyze Your Financial Statements
Ensure that your balance sheet and income statement are up to date and accurately represent your company's financial situation.
Update your balance sheet to include all assets, liabilities, and equity. An accurate balance sheet provides a clear view of your company's financial health, helping lenders assess your repayment capacity. The income statement should show your revenues and expenses over a specific period.
Make sure all recent transactions are properly recorded. Accurate financial information provides a solid basis for your application and facilitates lenders' evaluation.
Des informations financières exactes fournissent une base solide pour votre demande et facilitent l'évaluation par les prêteurs.
Tip 3: Obtain a Letter of Intent
Obtaining a letter of intent from an employer or contractor can strengthen your lease financing application.
This letter should demonstrate to the lender that the income generated by the financed equipment will support the lease payments. Including specific details about the agreement, such as expected amounts and payment periods, adds credibility to your application.
This proof of future income shows lenders that your investment is justified and that you have secured revenue sources to cover the payments. A well-written and detailed letter of intent reassures lenders about the viability of your project and your ability to meet financial commitments.
Tip 4: Prepare a Down Payment
Plan for a down payment, which might be requested by the lender, typically representing between 5% and 10% of the total equipment cost. This demonstrates your financial commitment and reduces the lender's risk.
Tip 5: Negotiate the Equipment Price
A well-negotiated price reduces the total amount of financing needed, making your application more attractive to lenders. It also shows that you are proactive and keen on maximizing the value of your investments.
When negotiating, ensure you compare multiple offers and know the market value of the equipment.
Use this information to get the best possible price. A price reduction can also lower the required down payment and monthly payments, facilitating cash flow management.
Tip 6: Avoid Recent NSF Transactions
Ensure your banking history shows no declined payments in the past four months. A history of incident-free transactions reflects good liquidity management. Declined payments, also known as NSF (Non-Sufficient Funds), can negatively impact lenders' perception of your financial reliability. By avoiding these incidents, you strengthen lenders' confidence in your ability to manage finances and repay the lease. Rigorous management of your bank accounts improves your application and approval chances.
Tip 7: Maintain Moderate Credit Utilization
Limit your credit utilization to less than 70% of your available limit. This shows lenders that you manage your finances prudently.
Moderate credit utilization indicates that you are not over-indebted and that you have room for unexpected expenses. This reinforces lenders' confidence in your ability to repay the lease, demonstrating responsible and balanced financial management.
By maintaining this moderate credit utilization, you improve your credit profile and increase your chances of obtaining favorable approval for your application.
Tip 8: Consider Additional Collateral
If your credit score is low, consider offering already paid-off equipment as collateral. This can strengthen your application and favor the approval of your request.
Tip 9: Consider a Cosigner
A cosigner with good credit can increase the chances of your application's approval, especially if your own credit is low.
Conclusion
By following these tips, you position yourself advantageously for the approval of your lease financing. Rigorous preparation and prudent management are key to succeeding in this process.