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

by

sprokop

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.

Stan Prokop is the founder of 7 Park Avenue Financial.com . See www.7parkavenuefinancial.com

The company originates business financing for Canadian companies and is a specialist in asset based lending and working capital financing . http://www.7parkavenuefinancial.com/Home_page.html

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