Leasing equipment is a logical and budget-friendly choice for businesses in Canada and the capital-intensive fields of construction, manufacturing, transportation, and medical services.
Equipment leasing allows a business to maintain sufficient cash flow while minimizing the sizable upfront investment needed to own this equipment. Yet, to qualify for equipment leasing, you must meet these definite necessities and prepare your business for approval.
Tips for Qualifying for Equipment Leasing
There are many ways to qualify for equipment leasing in Canada. Meanwhile, to get what you need for your business, below are tips to increase your chances of qualifying for equipment leasing.
Understand what lenders look for
The leasing companies assess the various factors to see whether they can give you the approval to lease. These include your business credit history, time in operation, annual revenue, and sometimes your credit score. The more financially stable you are, the better the leasing terms will be. Remember:
- A high credit score shows good credit history. Some lessors will consider your credit even if you have no credit history.
- Lenders: They often prefer to finance businesses that have been in business for at least 2 years because they consider this an indication of profitability. However, for those still qualifying, such startups might face stricter terms or a personal guarantee.
- Cash flow: This guarantees the loan that you can consistently and sufficiently provide the cash flow to pay lease payments.
Prepare your documentation
When you apply for equipment leasing, you must submit a few documents proving the business’s financial health. Have these documents:
- Income statement, balance sheet are part of the business financial statements.
- Recent bank statements
- Business registration and licenses
- Tax returns (business and sometimes personal)
- A quote or invoice from the vendor concerning the equipment
Storing such documents helps streamline the application process and increases your credibility with leasing companies.
Choose the right leasing company
Banks, specialized leasing firms, and equipment vendors in Canada offer equipment leasing. Companies focusing on just a few industries can help you since they should know what you need.
Compare providers based on the following:
- Approval criteria
- Lease terms and flexibility
- Interest rates and hidden fees
- Unused options at time of lease end (purchase, renew, or return)
Working with a broker can also help you match your profile with the right leasing company.
Consider alternative options for startups
Even weaker credit options may remain open for startups or businesses. Look into:
- Leasing is done directly by the equipment vendor.
- Giving a personal guarantee or a co-signer
- Providing a bigger down payment to lessen the financier’s threat.
Government-backed programs like the Canada Small Business Financing Program (CSBFP) may support equipment financing.
Conclusion
To be eligible for Canada’s equipment leasing program, you’ll need preparation, finance, and a knowledgeable understanding of what a lender is looking for.
By knowing what leasing companies look for and managing your business’s credit and cash flow, you can put yourself in the position to secure the best finance deal to assist you in obtaining the machines you require. With secure equipment, you can grow your business without using your capital.
