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SME Financing in Canada, 2003 — Part I: Financing Conditions for SMEs in 2001

4. Lease Financing

The economic slowdown in 2001 had ripple effects throughout Canadian capital markets, including the debt and leasing markets.¹⁶ This section identifies 2001 leasing market trends from the SMEs' perspective – particularly the request and approval rates for leases, the type of assets sought through leases, and the sources of the lease financing. The supply of leasing by financial service providers is summarized in Part III of this report.

In 2001, 7 percent of SMEs requested lease financing; almost all — 94 percent — were approved. Both requests and approvals for leases have dropped since 2000 (9 percent request rate and 98 percent approval rate), which may reflect the economic slowdown. However, more data collection and analysis will be needed to correlate these findings.

As shown in Figure 17, SMEs sought most (59 percent) of their lease financing from leasing companies, followed by manufacturers, dealers and suppliers (18 percent). Restrictions in the Bank Act have meant that chartered banks provided less (10 percent) lease financing to SMEs. These restrictions prevent banks from leasing passenger vehicles and light trucks, which are the single largest segment of the market.¹⁷ This is consistent with the findings in Part III, which found that domestic banks supplied 9 percent of the leasing market for leases under $1 million (amounts typically sought by SMEs) as of December 31, 2001. The other major suppliers of leasing included finance and leasing companies.

Figure 17
Requests for Leasing by Type of Supplier in 2001

16. For the purposes of this report, the term "lease" refers to both capital and operating leases. See the Glossary of Terms for a definition of these terms.

17. The Bank Act restrictions are outlined in more detail in Part III of this report.

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