Unless they are large corporations, many companies in Canada in need of equipments often do not have the financial resources to purchase them upfront. This is when equipment financing comes into the picture. Equipment financing in Canada, also known as equipment leasing, lets business owners or companies use their equipments for their operation for a limited time frame with a monthly payments. In this financing, banks or finance institutions, also known as the vendor, buy over the equipments that the companies require, and in turn lease the equipments to the companies with monthly installments. In the case where the company is not able to pay the monthly installments, the vendor has the right not to lease the equipments to the company, or sell the equipment to recover the repayment of the loan. Equipment financing for the company’s operation offers greater flexibility, as compared to purchasing the equipment.
Many business owners in Canada view equipment financing as an opportunity to test out the equipment at no extra cost, with no strings attached, and with buying possibility. Before committing to purchase the equipment, companies would take into consideration the profitability of their business. They may choose financing as the most economical if the business has an uncertain future, and return the equipment to the vendor after the job is done.
There are many types of equipment financing in Canada, such as vehicles, construction and heavy equipment, agricultural equipment, medical and dental equipment, and restaurant equipment. Usually, the vendor would require a few upfront monthly payments. The rights and obligations of the businesses are in the written financing contract that the company entered into with the vendor. Issues such as whether the company has to provide equipment maintenance records, whether the vendor can come to the company’s premise to inspect the equipment, and what is the buying provision, are all stated in the financing contract.
In addition, most equipment financing in Canada requires the business owner to notify the vendor of their intentions under the financing. Intentions such as, buying, renewing, returning, surrendering the equipment, or extending the period of financing, have to be made known to the vendor. The vendor also has the responsibility to notify the business owner of final termination procedures and issues. Equipment financing can range from three to five years. Companies in Canada are strongly advised to have the termination policies in place to allow the financing contract to be reviewed when it is about to expire.