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Why Leasing and Equipment Financing are more important than ever in the Canadian economy

Guest post by: Stan Prokop

Article Overview: The article highlights the relevance of leasing and equipment financing in Canada

Why Leasing and Equipment Financing are more important than ever in the Canadian economy

When we look at the statistics for business equipment financing in any industrialized country, Canada being no exception, we find that a very significant portion of Canadian business uses equipment financing and leasing to grow business and profits. In the current very difficult 2009-2010 financial environment equipment financing continues to play a dominate role in business growth and asset acquisition.

The general economy always plays a very important role in the over all use of leasing activity. It is of course interesting to note that lease financing grows in prospers in good and bad times. One could certainly make the case that we are in ‘bad times ‘in early 2010. Although we see significant signs of improvement all around us.

Ironically business equipment leasing can grow equally as fast in these ‘bad times’ we mention. Why is that the case? Well it is simply a function of overall business credit and liquidity being less available, with customer banks cutting back on term lending and overall customer exposure in many cases.

This forces the Canadian business owner or financial manager to source alternative financing and leasing is often a solid solution. Leasing is of course very strong when the economy is healthy, that’s not hard to understand. Business is growing and prospering, they require capital expenditures in all areas of their business – Leasing suits that need.

Major industrialized nations such as Canada and the U.S. require huge amounts of capital – Leasing assists the economy in meeting that capital need . The domestic leasing industry in Canada is very diverse – both geographically and by business and asset sector.

The leasing industry is the first to spot a major trend and capitalize on that trend in a positive but opportunistic manner. A good example of that is the current ‘Green Movement’ re: alternative energy, solar, etc. Many lenders are focusing on this new vertical with a variety of programs and structures.

Each country, Canada no exception, has unique guidelines regarding documentations, security, taxation, and accounting when it comes to leasing. These areas are often amended somewhat when it comes to cross-border type transactions. We also hasten to add that many of the significant players in ‘ Canadian ‘ Leasing are in fact from the U.S. and abroad – they have simply delivered their business models to the Canadian marketplace .

Canadian banks play a small to moderate role in equipment leasing in Canada – in general the industry is funded by the private sector.

In summary the size and the importance of the Leasing industry cannot be overlooking in the current economic environment.

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Article Tags: Canadian business equipment financing, leasing industry Canada



Related Forum Posts
Re: Service Or Product? - All things being equal Evan, I completely agree with you. A service would be much more manageable and predictable in a down turned economy. However, it is also important to recognize that the cost of goods also plummits during these bad times, and to amass stock or inventory for future sales could be part of capitalizing on this bad economy. Good luck with CBC!
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Re: Introducing a US franshise to a Canadian market - When franchisors begin to expand outside of the United States, Canada is one of the first areas they consider because: 1. Similar culture 2. Same language in most of country 3. Some provinces require registration, but it is not considered too difficult. 4. An economy that generally mirrors that of the United States (may be different currently) The main cost for a franchisor would be contracting a Canadian franchise attorney to convert their legal documents to meet Canadian law, then reprinting their marketing material. If a person sees a franchise they like, that is not currently in Canada, they might approach the franchisor and ask about becoming an area developer for the franchisor. I don't think that most franchisors would not sell a master franchise in Canada, in which the franchisee takes over the entire country, because Canada is such an opportune areaa, but by becoming an area developer the new franchisee could have the right to develop/sell several franchises in a given area.
Canadian Entrepreneurs...let's chat.... - I thought it would be nice to gather up all the Canadian entrepreneurs on one topic to discuss how everyone is getting along. I just realized Evan is Canadian as well! Hope he's able to join the conversation. Look forward to the chat. By the way, I'm in BC. Phil
Re: Service Or Product? - Service company always thrive in down economy. Let look at the advertising industies in any economy, you need to advertise your products or services even if you cannot afford any other things


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