REMEMBER

IF IT GOES UP IN VALUE OVER TIME - BUY IT

IF IT GOES DOWN IN VALUE OVER TIME - LEASE IT

EQUIPMENT LEASING

The Capital Leasing Pilot Project, under the Canada Small Business Financing Act (CSBFA) assists small businesses in obtaining capital leasing up to $250 000 for new or used equipment. Capital leases are made directly by participating leasing companies (lessors).

Eligibility Criteria

Most small businesses starting up or operating in Canada -- excluding farming, charitable and religious enterprises -- are eligible as long as their estimated annual gross revenues do not exceed $5 million during the fiscal year in which they apply for a capital lease. Businesses may be operated as sole proprietorships, partnerships or incorporated companies.

Which capital leases are eligible?

Capital leases may be used to finance:

• new or used equipment necessary for the operation of a business;
• the registration fee equal to 2% of the financed cost of the equipment, provided that the total amount of the capital lease does not exceed $250 000.

Which capital leases are not eligible?

Capital leases under the pilot project are not eligible:

• if the cost of the equipment exceeds $250 000;
• if equipment for which the financed cost is greater than 100% of the cost of the equipment;
• if the financing is used for:

Are there financing limits, and what are the requirements in terms of guarantees and security?

The total outstanding balance of all capital leases made under the pilot project and of all loans made under the CSBFA and the Small Business Loans Act (SBLA) cannot exceed $250 000. Lessors are required to register a security interest in the leased equipment; they may also take security in other business assets. Lessors may take personal guarantees or suretyships but not exceeding, in aggregate, 25% of the total financing amount of the capital lease. These guarantees or suretyships cannot be secured with personal assets of the guarantors.

What is the maximum term of a capital lease?

The term of a capital lease cannot exceed 10 years from the date the capital lease was entered into. In the case of used equipment the lease term must be less than the economic life of the equipment.

What is the maximum rate a lessor can ask for?

The imputed rate of interest (which is used to calculate the scheduled payments) cannot exceed 13.25% plus the Government of Canada bond rate for the term of the lease.

Any other costs?

The interest rate referred to above includes an administration fee of 1.25%. Lessors are also required to pay a one-time registration fee to the government equal to 2% of the financed cost of the equipment. The fee is payable by the lessee or it may be included in the total financing amount of the capital lease, provided that the total financing does not exceed $250 000.

Who issues these capital leases?

Leasing companies (lessors) participating in the pilot project. Lessors are expected to apply the same care for a capital lease as they would in the conduct of their ordinary business, that is to assess credit worthiness and administer the leases in accordance with their normal leasing practices and in accordance with the program requirements.

Owners of small businesses frequently lack the funds they need to finance business improvements or expansion. Financing may not be available to them unless they are willing to include their personal assets as security. Those wanting to start up new businesses face similar problems. Under the CSBFA and the Pilot Project Regulations, the federal government shares the loss with lessors in case of default by the lessee. The result is that financing is more accessible, and owners do not have to provide personal assets as security to support their business financing requirements.

Under the Act, the Minister is liable to pay to a participant lessor 85% of a loss which may be sustained by a lessor, provided that the requirements of the Act and Regulations have been met.

Administered under the Canada Small Business Financing Act (CSBFA), the program is a joint initiative between the Government of Canada and private-sector leasing companies.

Note: This Act applies only in respect of capital leases made after 31 March 2002.

Examples of what you can lease

• Agricultural Equipment
• Automotive Shop Equipment
• Computer and Networking Equipment
• Construction Equipment
• Energy Management and Production Equipment
• Golf & Turf Equipment
• Interconnect/Telephone Equipment
• Industrial Equipment
• Printing Equipment
• Machine Tools
• Medical/Dental Equipment
• Material Handling Equipment
• Office Furniture & Equipment
• Rental Fleet Equipment financing (booms, scissor lifts, forklifts etc.)
• Software
• Transportation equipment, trucks, trailers and satellite tracking
• Satellite communications, tracing and tracking
• Miscellaneous Equipment
   

A win-win-win situation

Since 1961, hundreds of thousands of small businesses have obtained financing that might not otherwise have been available to them - thanks to the Small Business Loans Program and its successor, the Canada Small Business Financing (CSBF) Program.

Today the Program continues to help Canadian small firms get business improvement loans.

The CSBF Program benefits small businesses, the lending community, the participating leasing companies and all Canadians:

• Small businesses gain access to financing that might not otherwise be available to them.
• The lending community and participating leasing companies can broaden their client base and meet the needs of emerging businesses.
• Canadians benefit because the CSBF Program helps businesses grow and create jobs - and the result is a more dynamic Canadian economy.

How do I apply?

Contact Northern Range Capital and let us help you apply for a CSBF lease or click on the link below and fill out the application and fax it back to us at 905-901-3128.

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SEE ALSO:   Small Business Financing

Copyright 2005 Northern Range Business Solutions Inc.