The leasing industry in Canada has historically dominated by a number of types of entities that provide equipment and finance leases for Canadian businesses.
The types of companies which are key players in lease financing in Canada can be broken down into the following categories:
Life insurance company
Leasing Union Credit Company
Third Party Independent Financial Company – Canadian Owners
Third Party Independent Financial Company – American Company Subsidiaries
Captive leasing company
Leasing Bank Entities – Subsidiaries of the Canadian Bank Division
We will dare say that maybe 90% of Canadian business owners and financing managers think of ‘third-party independent financial companies when they are looking to find lease financing for their capital equipment and expenditure.
Bank Chartered Canada has moved in the Canadian lease financing industry for years. At present only two Big 6 Canadian banks have separate separate rental entities that are actively marketing lease financing to their customers. In our opinion, the reason the customer chooses the bank lease financing entity is as follows;
The existence of the current banking relationship
Dollar transaction size
Let’s describe a little on the points. Because banks are in a position of having the lowest capital costs in Canada for the level of business financing in bank leasing transactions tend to be very good. On average we will observe numbers on larger offers tend to be 3-4% over the main level of Canada. This is a very good price, because independent companies tend to be priced at 4 to 5 to 6% over the inaugural level of Canada. It’s average of course because of the quality and unique customer credit situation.
Business customers have bank lines and arrangement of futures loans with their banks. So it is a natural logical extension that they will discuss with their needs with their bankers, which is possible, or may not be able to offer a rental financing solution. We indicate that only two Canadian rental banks have full rental entities. Some other banks have division leasing, which is much smaller and more specialized in size, and some banks choose ‘partners’ with third-party independent financial companies which are Canada or U.S.
We also refer to the size of the dollar as a key factor in the customer selecting a banking settings. Banks in Canada have almost unlimited capital, so they can certainly choose to finance whatever number they choose. We say unlimited capital, which is a little excessive but Canadian banks are currently seen as some of the strongest in their own world. Ranking and capital ratio.
The bank has traditionally been slightly slower to enter the rental financing area, and the bank uses functions in several ways to develop new corporate banking relationships. In fact, we have observed that in the 2009 and 2010 banking environment in Canada Bank Lessor actually tried to develop a corporate banking relationship full of customers who approached them for rental financing needs.
Leasing is a good source of profit for banks tend to make solid credit decisions on company credit assets and quality, and rental prices provide some good results compared to several other parts of their business.
Some banks in Canada, in the past, bought several independent private Canadian rental companies that are increasingly large and successful or have a special market or geographical niche … banks often quickly sell portfolios and eliminate the leasing division when they feel the market conditions show it.