Diversco

Benefits to this way of financing allow you, the users of equipment, to utilize the value of the asset as security to finance its acquisition. Because the lessor (leasing company) retains legal ownership of the equipment until lease end, your business can qualify for this lease based on the “generated cash flow” rather than on the “net worth” lending formula basis offered by most traditional lenders.

Efficient Use of Capital - Many businesses consider leasing to be the most efficient and effective use of available capital. One thing is certain. There is a far greater understanding today that most businesses make money by using equipment or vehicles not by owning them. Cash tied up in fixed assets are no longer available to finance inventory and the profit producing activities of production, distribution and marketing. Equipment and vehicles generally do not normally increase in value over time. Owning depreciating equipment is not always the logical answer. With the increasing speed of technology obsolescence, there may be little equity potential in owning equipment.
Fixed-rate leasing - Leasing typically offers long term financing at a fixed rate over the financing term. In this way the customer is insulated from spikes in interest rates that occur in the Canadian economy from time to time. This enables the business greater ability to predict it's financial results.
Flexibility - Flexibility is an innovative hallmark of asset-based financing and is particularly true in the small ticket leasing market, the market comprised primarily of SMEs. Leasing is generally a far more flexible means of using equipment or vehicles than traditional lending. This flexibility is a significant operational advantage in a number of situations where, the lease payments can be tailored to a customer's revenue streams and offers a level of flexibility in timing and payment schedules unmatched in the traditional lending sector. (For example, ski lift operators using equipment six months a year can make seasonal payments on its equipment. Similarly, other seasonal businesses such as school bus operators can take advantage of the unique flexibility that leases offer.)
Simpler Security Agreements and lower transaction costs - Because the lessor retains ownership of the equipment or vehicle leased and because the asset leased is generally the collateral for the transaction, leasing involves simpler legal security arrangements. This generally leads to lower transaction costs. The costs of assigning collateral, of legal documentation and of slower processing times for traditional bank borrowing can be significant, particularly for SMEs where many of the conventional financing costs are fixed and not based on the size of the loan.
Little cash required - Leasing can typically finance a higher percentage of the capital cost of a piece of equipment or of a vehicle than bank borrowing, often with little or no initial down payment required. This allows the lessee to preserve its cash or bank facilities to meet working capital needs.