Almost every business needs some sort of equipment to operate. If you own a restaurant, you’ll need an oven. If you own a store, you’ll need a cash register. Your business may also need upgraded equipment. Whatever the case, many businesses don’t have the money available to purchase new equipment outright.
Thankfully, equipment leasing exists. Equipment leasing allows business owners to rent whatever they need from a lender. As you are renting, whatever you borrowed will not belong to you. You will simply be making payments on it in exchange for using it.
Financing is also another option as it allows business owners to take out a loan to purchase whatever they need. Like a normal loan, businesses will simply need to make monthly payments on it to ensure they can keep their equipment. Otherwise, it could be taken away as collateral.
INCOME.CA is going to look at the best equipment leasing available. If your business is in need, keep reading!
Types of Leasing
Equipment financing is a type of business loan that can be used to purchase commercial equipment. For example, if you own a clinic, you can use equipment financing to purchase medical equipment. Just like a typical loan, you receive commercial equipment financing in exchange for monthly payments. The business loan amount will also be subject to an interest rate and principal for the entire term. Having said that, here are the best loans to help your business in Canada.
The commercial equipment tends to be collateral against the loan. This means that you can keep the equipment as long as you are paying off the loan. If you miss a payment, the equipment can be taken to secure the outstanding balance. Once you pay off the loan in full, the equipment will be yours.
Equipment financing is different from equipment leasing. Equipment leasing is when you rent the equipment for a lease term. At the end of the lease, you can buy the equipment, or it is returned.
Equipment financing is thus a good option for businesses that need commercial equipment but can’t pay for it right away.
An operating lease is a type of equipment leasing. It allows businesses to use or operate an asset for a lease term without owning it. Terms tend to be shorter than the expected life of the equipment, so it can then be sold by the leasing company to the business or leased out again. Operating lease terms are thus usually less than a year long.
If you are renting equipment on an operating lease for less than a year, it is not considered an asset or a liability to the business. In this scenario, it is simply considered a rental expense. Any term more than a year, however, will be considered an asset or liability and need to be included on your business balance sheet.
If you plan to return the equipment to the leasing company at the end of the term, your business will typically have to pay transportation and shipping costs. You will likely also need insurance for the equipment in case anything happens to it in your care.
If you are considering leasing a car for your business, contract hire may be your best option. Businesses with delivery services will need a vehicle to do so. Contract hire is thus available to sole traders, limited companies, and partnerships. It is an agreement between the leasing company and the business to lease the vehicle for a set time at a fixed monthly price.
The monthly price depends largely on your deposit. The larger the deposit you pay, the lower the monthly payments will be. The price also depends on the original cost of the vehicle, the mileage allowance you want, the duration of the lease, and the interest rate.
The better your business’s credit score is, the better the interest rate will be. The monthly payment will also take into consideration the depreciation of the vehicle throughout your term.
Contract hire leases typically last between 24 to 60 months. When your contract hire lease is up, you return the vehicle to the leasing company. There is no option to buy the vehicle at the end of the term; you must return it. If the vehicle is in good condition, you won’t need to pay anything. If maintenance is needed or you went over your mileage, you will need to pay extra.
5 Best Equipment Leasing Companies Review
TD Canada Trust
TD Bank offers Canadians the opportunity to lease the equipment they need for their business, without consuming business capital.
TD has an experienced, dedicated team focused solely on business equipment financing and leasing. All specialists are industry experts and can offer expert knowledge and advice.
Equipment is available across a wide range of industries, including retail, IT, utilities and manufacturing, healthcare, scientific and technical services and transportation and warehousing.
- They offer tax-exempt leases and tax-orientated leases.
- They offer the opportunity to upgrade the equipment when necessary.
- Applications worth less than $50,000 are processed within 24 hours.
- They offer low fixed rates.
- 100% financing is available.
- An equipment lease buy-back option is available.
- They offer superior local service across Canada.
- TD is more heavily focused on equipment finance, rather than leasing.
- Larger applications have a longer processing time.
Symcor is an industry leader that has been active since 1995. They currently have an impressive 94% retention rate of their clients.
They offer a variety of leasing services, including payment processing equipment. Symcor boasts of being industry experts. They offer leading advice and services to their customers.
They are also focused on helping the environment and local communities. They have even won a variety of awards, including Canada’s Greenest Employer and the Employment Equity Achievement Award.
- The scalable payment solutions are tailored to each business’s individual needs.
- They offer maximum security on payments.
- They offer cheque processing services.
- Symcor processes tens of thousands of transactions every day.
- They update their products based on the evolving payment options.
- Leasing prices are lower than many of their competitors.
- They are usually rated highly on review sites.
- They currently have only 600 leasing customers across Canada.
- Leasing is not the main focus of their business.
3. Moneris Solutions Corporation
Moneris is Canada’s number one payment processor. They have 350,000 merchant locations and process more than 3.5 billion transactions every year. Moneris offers a variety of products and services for lease.
Moneris’ products are aimed specifically at the retail, restaurant, trade, professional practice, not-for-profit or enterprise industry.
- A full range of hardware is available for rental.
- Medium to large-sized companies should be able to negotiate a lower price.
- Products include credit card terminals, Point of Sale (POS) hardware bundles, POS Software and payment gateways.
- The support team is available 24/7 via phone, live chat or social media.
- Moneris helps you with the setup and gets the products up and running quickly.
- Their website offers business support and business growth ideas.
- Contracts are only available in three-year terms.
- There is a $300 early termination fee.
4. Federated Payments
Federated Payments offers a variety of leasing options for businesses in Canada. They emphasize their relationship-based leasing contracts, which do not charge large fees or penalties.
Federated Payments currently has more than 250,000 leasing clients across Canada. They are a merchant account provider offering merchant services in Canada.
- No down payment is required.
- You can choose to lease new or used equipment.
- There are variable payment options for seasonal customers.
- The lease term offers a fixed rate agreement.
- An Accordion Feature is offered. This allows you to increase or decrease payments for tax sheltering purposes.
- They offer the opportunity to lease equipment or property for your business.
- Terms are renewable for one-year terms.
- The cost of leasing may be higher than its competitors.
- Leases are only available in three-year terms.
5. Easylease Corp
Easylease Corp is one of the largest Canadian-based equipment leasing and finance companies. They offer extremely competitive terms and prices to both big and small businesses.
Easylease is known for its excellent customer service. In particular, their knowledgeable staff and highly responsive manner is something they pride themselves on.
They offer a wide range of equipment leasing in a variety of industries including construction, agriculture, and finance. They also offer vehicles and trailers for lease.
- They have a high credit approval ratio with same-day credit approval.
- Easylease offers nine different types of leasing. This includes a lease line of credit and a skip payment lease. This allows you to choose the lease that makes the most financial sense for your business.
- You can choose to lease new or used equipment.
- They offer financing solutions and e-business tools to help Canadian businesses maximize their profits.
- They specialize in offering finance and leasing to new businesses.
- Vendors can join the Easylease vendor program free of charge.
- You have to pay to terminate your lease early.
- You must pay extra to insure the products that you lease.
Leasing vs Buying Assets
When businesses require new equipment, there is usually a debate between buying it with their own money or financing or leasing it. There is no right or wrong answer to which is the best option because there are pros and cons to both buying and leasing. Let’s take a look at both.
Pros of Leasing
- The initial cost of an equipment lease is lower. This is great for new businesses who have other things to spend money on in the beginning.
- An equipment lease is tax-deductible as a business expense.
- As technology is constantly updating, leasing allows you to always have the best equipment. You can lease equipment for your business for a short time, then upgrade to new equipment at the end of your term.
- Equipment leasing tends to have more flexible terms than financing. Companies are more willing to choose leasing than financing for a business with poor credit.
Cons of Leasing
- The cost to lease tends to be higher overall than if you bought it outright.
- You will not own the equipment that is being leased to you.
- Even if you stop using the equipment, you will likely have to pay the equipment lease for the entire term.
Pros of Financing/ Buying
- If you take out financing and pay it off, the equipment will belong to your business. If you purchase it outright, it’s yours.
- Equipment that you bought for your business can also be deducted from your taxes. This can help put you in a lower tax bracket.
- Since you own the equipment, you can make any adjustments you want to it.
- You can sell it if you aren’t using it anymore.
- The initial cost of purchasing will be more expensive than leasing. Financing can help with this, though, as you will just have to pay monthly payments.
- If you get equipment for your business that gets updated a lot, yours will become outdated quickly.
- You will have to pay for any maintenance needed.
Ultimately, financing or buying your equipment versus leasing it both have their pros and cons. The best option for your business – take a start-up, for example – depends on your budget and needs.
How Are My Payments Recognized/Treated?
With equipment leasing, your payments are treated as rental payments if you have an operating lease. If you have a capital lease, payments are treated as repayments with interest. Payments stop at the end of your term. At this point, you can buy the equipment or return it to the lender.
With equipment financing, your payments are treated as repayments with interest. Every repayment you make goes towards reducing the amount of your business’ loan. Once all payments are completed, you own the equipment.
Do I Own The Equipment?
With equipment leasing, you do not own the equipment; you are simply renting it. The leasing company you rented the equipment from will still own the equipment even though it’s in your possession. Most leasing companies will give businesses the option to purchase the equipment at the end of the term. If you do, then you will own the equipment.
With equipment financing, you do own the equipment. This is because financing is a type of loan that helps you pay for the equipment. So, equipment loans just need to be paid off for the equipment to belong to you fully. Until you pay off the loan fully, the equipment will be used as collateral. This means if you don’t make your payments, the equipment can be taken.
Do I Need to Make a Down Payment?
No down payment is required with equipment leasing. You can, however, put a down payment down to lower the cost of your monthly payments. The larger the deposit, the lower your monthly payments will be.
Equipment loans, like regular loans, do require a down payment. This shows the lender that you can afford to make the monthly payments towards paying off your loan. The down payment required depends on the equipment and the lender.
How Frequent Are My Payments?
With equipment leasing, you can structure your payments to match your business’ cash flow. If your business only earns enough money to pay twice a year, for example, you can choose to pay semi-annually. This means with equipment leasing, you can typically choose from monthly, seasonal, semi-annual, or annual payments.
With equipment loans, businesses usually have to pay monthly. If the lender is flexible, however, you may be able to structure your payments around your business’ cash flow as well.
Will I need to Pledge Any Collateral?
Equipment leasing does not require you to pledge any collateral. This is because you do not own the equipment, so the equipment itself is considered collateral. If you don’t make your payments, the equipment will be taken away.
Whether or not you have to pledge collateral to finance equipment usually depends on your personal or business credit score. If the credit score is poor, you will likely have to pledge assets as collateral. This ensures that the lender will get repayment, one way or another.
In most cases, the equipment you are financing can be used as collateral. If you don’t pay, the equipment will be taken away to pay off the rest of your loan.
The Bottom Line
Most businesses cannot afford big expenses out of pocket. Equipment leasing or financing thus may the best option for your business as it will help you get the materials you need at a low initial cost. Whichever type of lease you choose should be the one that benefits your business the most.
For example, if you don’t need to own any of the instruments you require, you can simply lease it. This way, you can use the items and not worry about them becoming outdated or broken. The company that lends to you will have to pay for any maintenance needed as they are still the owners.
If the items you require will be useful to your business for a long time, owning them may be a better idea. Even if you don’t have the money required upfront, financing is available as a loan to help you purchase whatever you need. Financing is a great option as you won’t have to pay much upfront but will still own the items in the end.
If you’re still not sure which is the best option for you, look into the cost of taking out a lease versus the cost of a specific item. If you need a dishwasher, for example, look at the cost of both options and see which makes more sense for your business in the short term and long term.