The lease equipment financing industry in Canada has a self governing body called the CFLA – Canadian Finance and Leasing Association. Its U.S. equivalent organization recently put out a report on business financing availability and optimism – Let’s look at some of the key highlights of the report and try and put some Canadian flavor to them!
The equipment lease financing industry in Canada finances hundreds of millions of dollars of equipment and capital expenditures every year, in the U.S. that number is of course in the Billions. The Canadian Finance and Leasing Industry is a major driver in the Canadian economy! Overall confidence is increasing in business owners minds around:
1. The decision to acquire and finance new capital expenditures/equipment
2. The ability to get that financing approved!
Confidence in business financing seems for the first time to be increasing slowly and steadily from the rock bottom lows the world experienced in 2008 at the time of many financial implosions.
Most business owners are feeling that business conditions overall is improving, only a small minority feels things are trending downward. However, close to half of the respondents in the U.S. survey (and we feel it’s the same here in Canada) feel that the overall business environment will generally be ‘the same’ for the next half year or so.
Those companies that do have a demand for lease financing and equipment loans to fund their growth in capital expenditures believe that leasing continues to be an attractive alternative to other forms of debt. 30% of the U.S. business owners felt that lease financing demands will in fact increase.
Many business owners, both in the U.S. and Canada are still concerned about overall access to capital – that thought transcends all businesses, small and large, as the ability to get working capital, bank, and term financing in the last year or so has become increasing difficult.
Canadian business owners are clearly more optimistic than they have been in the last year or so, but we would strongly believe that the overall Canadian economic environment can best be reported as ‘fair ‘.
Putting the business owner and the customer aside for a moment, the leasing and equipment financing industry it has its own transitions and challenges going on. The leasing industry in Canada has historically been dominated by a number of different types of entities that provide equipment and lease financing to Canadian business. Many lease companies have exited the market, some have re focused their businesses on only their core competencies, and all lease firms have had to in general raise rates and tighten credit conditions. The majority of the industry is financed via banks, life insurance firms, and securitization firms in Canada. The trickle down theory kicked in, and as these three lynch pins of financing in Canada had their own problems this of course affected the lease co’s.
We would appear to have a classic stand off in the works – banks and lease companies are waiting and looking and focusing on more profitable transactions, and small and medium sized firms are not yet 100% comfortable that financing and growth and profits are around the corner. Let’s stay optimistic that both sides can meet on comfortable territory!