Where to Turn to for Equipment Leasing and Commercial Lease Finance in Canada

Updated: February 22, 2011

The types of firms that are the key players in lease financing in Canada can be broken down into the following categories:

Life Insurance Companies

Credit Union leasing firms

Third party Independent Finance Companies - Canadian owner

Third party Independent Finance Companies - Subsidiaries of American firms

Captive Leasing Companies

Bank Leasing entities - Subsidiaries of divisions of Canadian banks

We would venture to say that probably 90% of Canadian business owners and financing managers think of 'Third Party Independent Finance Companies' when they are looking to source lease financing for their equipment and capital expenditure needs.

Canadian chartered banks have moved in an out of the Canadian lease financing industry over the years. Currently only two the Big 6 Canadian banks have full fledged separate lease entities that actively market lease financing to their customers. In our opinion the reasons customers choose a bank lease financing entity are as follows;

Pricing

Existence of a Current Banking Relationship

Dollar size of transaction

Let's elaborate a bit on those points. Because banks are in the position of having the lowest cost of capital in Canada for business financing rates on bank leasing deals tend to be excellent. On average we would observe that rates on larger deals tend to be 3-4% over the Canadian prime rate. This is excellent pricing, as independent firms tend to price at 4 to 5 to 6% over the Canadian prime rate. That is on average of course because every customer's credit quality and situation is unique.

Business customers have bank lines and term loan arrangements with their bank. So it is a natural logical extension that they would discuss their needs with their banker, who may, or may not be able to offer a lease financing solution. We indicated that only two of Canada's chartered banks have full fledged lease entities. Some of the other banks have leasing division, which are much smaller and more specialized in size, and some banks choose to 'partner' with third party independent finance firms that are both Canadian and U.S.owned.

We also referenced dollar size as a key factor in a customer choosing a banking lease arrangement. Banks in Canada have virtually unlimited capital, so they certainly can choose to finance any amount they choose. We say unlimited capital, that is a bit of an exaggeration but Canadian banks are currently viewed as some of the strongest in the world re their own credit ratings and capital ratios.

Banks are traditionally a bit slower to enter into the lease financing area, and banks use the function in some respects to develop new corporate banking relationships. In fact we have observed that in the 2009 and 2010 banking environment in Canada the bank lessor in fact attempt to develop a full corporate banking relationship with customers who approach them for lease financing needs.

Leasing is a good source of profit for the banks - the banks tend to make solid credit decisions on assets and corporate credit quality, and lease pricing provides some nice yields compare to some other parts of their business.

Some banks in Canada have, in the past, purchased some of the private independent Canadian lease companies that were getting large and successful or had a specialized market or geographical niche... Banks are often quick to sell portfolios and eliminate leasing divisions when they feel that market conditions suggest that.

In summary, the Canadian equipment leasing and commercial lease finance landscape is made up of a number of market participants. Banks play a key role, but not a dominant role in the industry. Lease financing via a bank is often a relationship driven arrangement with the business customer's current incumbent bank. Banks who participate in equipment leasing finance f have excellent rates but higher credit and asset requirements.

Featured Research
  • EHR Implementation

    More and more medical practices are selecting and implementing electronic health records (EHR) than ever before. In fact, statistics show that the number of practices who have purchased an EHR has doubled in just three years. That being said, many practices fail to prepare for their new EHR and thus do not gain the full benefits that come with implementing a solution. more

  • Selecting the Right EHR for Your Practice

    The purchase and implementation of an electronic health record (EHR) system is no small feat and is a big step for a practice, small or large, to take. Selecting your new EHR is one of the most important decisions that you will make for your practice. more

  • 8 Ways Business Travelers Can Save with VoIP

    Do you or any part of your workforce travel for work, or even telecommute? If that answer is yes, then you should be utilizing mobile VoIP. With VoIP, businesses have been found to save as much as 40% on local calls and a whopping 90% on international calling expenses. more

  • Top 10 Contact Center Tools for an Unforgettable Customer Experience

    It should come as no surprise that consumers have only increasingly become less and less brand loyal in the modern age. In fact, 89% of them have switched brands within the last year due to a poor customer experience. One of the major steps to preventing this customer churn is to invest and invest heavily into improving your customers' experience. Now the major question to ask yourself is, "of all the contact center tools available, what are the ones that I should be utilizing for my business?" more

  • The Future of ERP

    Today's business decisions are data-driven and the difference between success and failure can be boiled down to utilizing the correct data. Now more than ever, companies have access to not only robust data but consumable data as well, through Enterprise Resource Planning (ERP) software. more