Equipment Financing In Canada - A Mid Term Report Card

The following article was published in the CANADIAN EQUIPMENT FINANCE MAGAZINE magazine - ( SEPT/OCT ISSUE )




Back In The Game

By Stan Prokop

The Canadian Leasing industry continues to take part in a strong upturn with portfolios growing at a strong pace. As the industry came out of the 2008/2009 global financial crisis, the industry has raised its sights on new goals for growth and new market segments. These trends have increased the overall importance and visibility of the industry, as it maintains its 'go to' status in asset financing for companies in virtually every industry.

A variety of financing mechanisms – i.e. going public, private equity, access to securitization facilities, etc., allow the industry to accommodate every need of the Canadian borrower. The ability to syndicate larger transactions or portfolios has allowed numerous players in the industry to seem – you guessed it – larger than they are!

So, what is in effect happening in the industry? In many cases it's a borrowers market as borrowing rates for lenders and lessees are at an all time low. There is some irony in the fact that while the lease finance industry is perceived by business borrowers as a quicker and easier way to finance new or existing assets, the reality is that there are complex issues that independent lessors face everyday.

They include:

• Taxation

• Changes in accounting (the near death of the operating lease)

• Capital structure requirements

• Entry of Canadian chartered banks into various segments that were previously the domain of non-bank lessors (sub-prime automotive, small ticket)

Yet the old adage that 'the more things change the more they stay the same' seems to hold true, and business borrowers – from startups to major corporations – continue to view lease financing as flexible, convenient, easier to obtain with respect to credit approval, and as an alternate credit facility. That data has been in my PowerPoint presentations for 35+ years now!

Certain segments of the market continue to enjoy what can only be called ' astounding' growth. One of those is the automotive and truck sector where small and large borrowers alike are looking to conserve capital, lower fleet costs, and acquire and restructure assets.

Element Financial has enjoyed what can only be termed a meteoric rise in this industry segment, and approaching a market capitalization of $4 billion dollars in only a few years. Simply speaking capital markets are 'user friendly' these days – and market players such as the life insurance companies continue to finance a large part of the industry via securitization facilities.

Technology continues to be a key focus in the industry as firms struggle to integrate front and back office shops and stay on top of leading software and internet trends to deliver service in a timely and cost effective fashion. One other aspect of technology is that captive tech lessors such as HP Financial Services and IBM Credit Corp., deliver billions of dollars of hardware, software, cloud, and SAS solutions annually to the market.

Vendor programs always have, and will no doubt continue to be a mainstay in the industry in Canada. They allow companies with products and services to differentiate themselves from competitors and use financing vehicles such as leasing as a competitive advantage.

In summary the industry continues to put capital to work every day. That 'open for business' attitude satisfies micro, small, mid, and large ticket transactions in almost every industry in Canada. New and existing players alike are truly ‘long and deep’ in the Canadian economy .

Stan Prokop is principal at 7 Park Avenue Financial and specializes in business financing for Canadian firms, such as working capital, cash flow, asset based financing, equipment leasing, franchise finance and Canadian tax credit finance. Founded in 2004, the company has completed in excess of $90 million of financing for Canadian corporations. www.7parkavenuefinancial.com




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


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