Equipment financing sources can be categorized in a number of different ways.
First, the actual type of financing facility available to finance equipment is either a loan or a lease. For an equipment loan, the actual piece of equipment is owned by the business and is financed by a loan provided by an institutional lender that is also the responsibility of the equipment owner.
In the case of an equipment lease, the actual piece of equipment is owned by the leasing company who in turn provides the business with a lease and the right to use the asset. Leases can be written as either operating leases and capital leases, each with their own specific requirements and conditions that can also vary from one country tax jurisdiction to another.
Equipment financing is further categories by equipment type and industry application. Through specialization, lenders have a better idea of the resale value of the their underlying security in the event they have to take a collection action against a borrower or lessee in default.
The last major type of categorization is connected to the credit profile of the borrower. Providers of equipment loans, for instance, tend to only focus on low risk lending scenarios where borrower credit is considered to be good to excellent.
The credit spectrum can be categorized from AA to C levels of credit. For each type of credit, there are borrowers that will focus on that level of credit risk and will charge a cost of financing that is in keeping with the level of credit where lower levels or credit get charged higher costs of borrowing.
The Canadian equipment financing sources primarily include banks, credit unions, and leasing companies. Depending on the area and related industry, there can be a very diverse group of lending sources for equipment. At the same time, for remote areas, the number of available sources will likely be less as many providers of equipment financing function on a regional basis only.
While there are many sources to consider, not all providers have their own retail services, relying on equipment financing brokers to bring and administer their products in the market place.
In these cases, the only way to get access to certain lender programs will through an equipment financing broker.
A good broker will not only provide you with greater access to capital sources, but can greatly assist you by only focusing on relevant lenders and helping you properly structure your equipment financing application.
Like anything else, there are good brokers and those with little to no experience. Securing the services of a broker that is more of an equipment financing specialist can definitely save you both time and money.
If you have any questions regarding equipment financing, please give use a call and we’ll make sure all your questions get answered.