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NGExpert financial copywriter
Every Canadian business needs equipment to operate, but commercial machines, vehicles and processing systems can be expensive.
Page written by Chris Godfrey. Last reviewed on July 23, 2024. Next review due April 1, 2025.
Price tags of more than $1million are common for the most sophisticated machinery – which is why most Canadian SMEs prefer to lease their commercial equipment instead of using valuable working capital to buy with cash. Pay over time with a low or no deposit deal, and return or keep the equipment at contract end. Forget about paying with cash. A flexible commercial lease can give you the machinery you need now without hurting cashflow.
Commercial equipment is an all-inclusive term for the machines, devices and processing systems used by organizations to produce, ship, and market the products and services they sell. Commercial equipment is critical to every business sector, and it may take the shape of complicated production machinery that is used in manufacturing, food processing, or the refinement of raw materials. It could also refer to trucks and other types of vehicles used to load and transport goods. It may even be IT and tech, accounting systems, or the retail self-service sales kiosks found in supermarkets, train stations, and airports.
In fact, apart from some specific instances, ‘commercial equipment’ can mean almost anything a business needs to operate, and virtually any machine or system can usually be obtained with a cost-effective, commercial equipment lease.
Commercial equipment leasing is available to almost every type of Canadian business. No matter if you’re a sole trader, a small SME, a mid-size or large company, or even if you have weak credit and have been turned down elsewhere, there’s a commercial lease for you.
Businesses have three options when it comes to obtaining the equipment they need to grow – buy with cash, finance with a loan, or secure the equipment with a commercial lease. What’s the difference and which is best for you? See below:
Cash transaction: The simplest form of transaction. Although it eliminates the need to pay fees and interest, buying big-ticket commercial machinery with cash can put a huge dent in cashflow – which is why cash purchasing seldom makes business sense. Why tie working capital up in expensive equipment that will depreciate, when those same funds could be used for other productive purposes – such as expansion, new product development, or marketing?
Finance: This is a loan that allows you to pay for the equipment over time, spreading the cost across months or years. Typically, you will pay the loan back, (plus interest and any fees), in fixed monthly instalments. At the end of the loan, you own the equipment outright. The key benefit of finance is that is takes the strain off cashflow, allowing you to use your working capital for other business purposes. However, commercial equipment finance typically comes with higher payments than leasing, may leave you stuck with obsolete equipment at the end of the loan, and is often less tax efficient than a lease.
Lease: Similar to a loan, except you are not buying the equipment, you are renting it over an extended period. At the end of the contract, the equipment will either go back to the lessor (equipment provider), or the lessee (you) may have the option to buy it for a pre-agreed sum, (sometimes as little as $1). Depending on the terms of the contract, the lessor may be responsible for maintenance of the equipment. Commercial leases usually come with lower monthly payments than financing, but with the same support to cashflow. They can be very quick to arrange, and do not appear on the company balance sheet. In most cases, the entire payments (not just the interest) can be written off as a fully tax-deductible expense.
Your financial plan will determine which method of funding is best for your business. If you want to add the equipment to the balance sheet and own it outright as soon as the loan is paid off, a finance loan may be the way to go. However, if you want the lowest monthly payments, the biggest tax deduction, the option to buy or return the equipment when the contract ends, and you wish to avoid the potential liability of owning obsolete equipment, commercial leasing may be best for you.
Commercial equipment leasing is a specialist financial area with differing rules of application and requiring deep knowledge of many business sectors from the lender. Canadian SMEs seeking funding may find themselves forever searching and making applications to lender after lender without success. The delays this can create could cause them to lose revenue and leave their business vulnerable to competition.
Instead, working with a broker, who can access commercial equipment leasing from a wide range of lenders is a better way to go. No more cold calls and endless demands for information, just tell us what you need and leave the rest to us.
Give your business the equipment it needs to grow. Register with Swoop to find the best rates, the best terms and the best commercial finance options today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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