What is Asset-financing and how can it help your business succeed and grow? By providing extra facilities alongside cash resources and existing bank credit lines, asset finance can offer a quick solution without affecting a business’s current financing arrangements. Moreover, asset-finance companies understand seasonal industries and can structure payments to reflect the realities of your business. Session attendees will gain an understanding of the how they can use equipment financing as a key source of capital and how to negotiate terms that reflect the unique needs of the landscape industry.
Who is the Canadian Finance & Leasing Association?
The 230+ corporate members of the CFLA are active in the asset-based financing, equipment and vehicle leasing industry in Canada. Members range from large multinationals to national and regional domestic companies, crossing the financial services spectrum from manufacturers' finance companies and independent leasing companies, to banks, insurance companies, and suppliers to the industry. A list of CFLA members appears below.
The asset-based financing and leasing industry is the largest provider of debt financing to business customers and consumers in Canada after the traditional lenders (banks and credit unions).
In 2016, the Centre for Spatial Economics estimated that the industry financed $122 billion in new assets for a total of $379 billion in assets financed. The Centre went on to estimate that the industry had a $50 billion positive impact on Canadian GDP in 2015 alone.
What is Asset-based Financing?
Asset-based financing is the financing of equipment, vehicles and related assets by way of specific asset-based priority financing, that is, the financing of particular equipment and vehicles and related items or services, primarily by way of lease, but also by secured loan or conditional sales contract.
The specific assets financed secure the borrower's unconditional obligation to make payments over the term of the agreement. In this way, users of equipment and vehicles can use the value of the asset as security to finance its acquisition. This form of financing relies on cash-flow-based credit analysis. Because the financing company retains legal ownership of the asset until the lease end, it allows a business or person to qualify on generated cash flow rather than on a net worth lending formula basis as typically offered by traditional lenders.
The services of the leasing industry are complementary to traditional banking and other financial lending in providing incremental capital to increase the pool of available credit in Canada and provide a vital competitive alternative in the financial services sector.
Funding for this industry comes from commercial markets, notably from pension funds, insurance companies and banks. In addition, well-capitalised manufacturing and servicing companies with substantial earnings have decided to leverage their own equity base and core competencies rather than using third parties. This has led to many manufacturers establishing their own financing arms or partnering with those who manage it for them. Many CFLA members fall into this category.
To raise living standards and improve the quality of life for all Canadians, the economy must become more productive. By facilitating the acquisition of productive assets by Canadian businesses and consumers, the asset-based financing industry is helping Canada work smarter.