While the typical equipment leasing spectrum tends to cover off virtually any type of asset and almost any level of credit, in Canada, this full range of equipment lease choices is really limited to Ontario.
The size and diversity of the Ontario economy can support a large number of equipment financing companies due to the ability of each lender or lessor to become more specialized on certain asset groups, industry types, credit rates, and even regions within the provincial geography.
To this last point, businesses located in the outlying areas of northern or northwestern Ontario will not be afforded the same financing opportunities as those in the Greater Toronto Area (GTA), but in most cases, they will still have more options than many other parts of the country.
Ontario has a significant number of boutique equipment lenders that are relatively small in size in terms of dollars in their lending portfolios. But collectively, they provide tremendous coverage of all the different possible borrower profiles and equipment types.
And for many asset types, the competition can be significant, providing more choices and options for business owners and managers.
While the size and diversity of the provincial economy drives the overall equipment financing market, there are a few key aspects of a large economy that make it more appealing to lease companies.
First, industry diversity allows a finance company to specialize on the specific asset types in a given sector. This is important to better understand how to value used equipment offered as security and how to liquidate assets to cover off outstanding balances should the need arise.
Larger industries will have active resale markets. For leasing companies, this provides a market for not only disposing of assets on a timely basis, but also creating a secondary market for financing used equipment.
Second, large diverse economies are less impacted, on average, by economic shocks. While the current recessionary impacts are definitely felt in Ontario and across Canada, the Ontario market impacts are always going to be smaller for a number of reasons. 1st, recessionary forces shut down lenders as the money supply becomes constricted. If you’re located outside of Ontario and you lose a key lender that’s available to you, the impacts on your business can be significant if there’s no close alternative. 2nd, a diverse economy will absorb financial shocks better than one focused only on one or two industries.
Third, larger economies tend to offer more sources of capital to lenders. When economic pressures build up, one of the biggest challenges an equipment finance company can have is maintaining sources of capital for their leasing activities. If you’re a leasing company and only have one source of capital that gets impacted by recessionary forces, you can quickly be out of business. While this will also happen to Ontario based equipment leasing sources, it will likely happen less often, and when it does happen, there will be alternative equipment leasing companies ready to step in to gain market share.
The bottom line is that business owner in Ontario may have several equipment financing sources to choose from at any given time.
The key is focusing on relevant lenders that are the most suitable for the equipment you want to finance and the overall financing profile of your business. The best way to get the best results and avoid many of the more typical mistakes, is to work with an equipment financing specialist.