Caution - Danger Ahead! IT Finance and Computer Leasing. Technology Financing Tips

It's probably just us, but we think there's no aspect of equipment financing in Canada where one small piece of information could cost you, or make you thousands of dollars. Let's cover some IT financing (IT = information technology) basics. All of a sudden that cautionary road sign up ahead won't be as much of a concern.

Although the actual benefits and economics of any lease should always be considered, it just seems more of a need when we are talking about IT finance for your infrastructure, computer and even telecom needs. The challenge is actually pretty basic, matching a financial solution to those fast-paced (and expensive) technology needs.

So know what you will face, what decisions you need to make now, and during and at the end of your lease financing is, well, critical!

The reality of tech financing is you have to be pretty sharp and well-informed in several key areas - just knowing those areas is important. They include documentation, structure, as well as your rights and obligations in certain lease arrangements.

Hardware makes up probably the majority of dollars in computer leasing transactions. Whether it be telecom, server, personal computer, laptop, notebook, tablets or even "cloud" type solutions, that's where the bucks seem to be. Canadian business owners can finance hardware separately through one of the two lease vehicles available, or your transaction can be combined with soft costs such as application software, installation, etc.

Where hardware financing gets somewhat tricky and challenging is when it comes down to operating leases, residual values, disposition of equipment at end of term, etc.

The majority of Canadian business has financed larger computer leasing and IT finance technology projects via operating leases. However, in the next several years, major changes in international accounting rules might well render a lot of the benefits of operating leases less effective, so it's critical to stay on top of this development in accounting.

Although larger, more sophisticated Canadian businesses have been using software financing for years, many smaller and medium-sized businesses sometimes aren't even aware soft costs such as software can be financed and bundled into your IT finance transactions. A good tip here is to ensure you understand how the cost of software is priced and blended into your entire transaction. It is most often amortized in full and sometimes attracts higher rates.

Medium-sized and larger corporations are encouraged to take advantage of a Master Lease arrangement. A one-time negotiation of terms, rights and obligations is going to save you time and dollars in the years ahead, along with the ease of simply adding on additional schedules of assets to be financed when you need them.

A common misstep in computer leasing is the failure of Canadian business to separate the financing from the manufacturer of the equipment, especially when it comes to warranties, service and the right to use. So be careful in addressing issues separately, with the right party.

The largest benefits and the most risk in IT finance come from what happens during and at the end of a technology leasing transaction. Investigate and understand thoroughly your rights to terminate, upgrade or renew at the end of the term. If you have entered into a capital lease to own type scenario, monitor your purchase options at the end of the term.

Is there anything more "mission critical" than technology, computers and telecom assets in Canadian business? Debatable, but doubtful, don't you think? All of a sudden that "Danger Ahead" becomes manageable.