Summer 2020
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Note from Editor: With the trucking industry being deemed an ‘essential service’ and adapting to the day-to-day changes and challenges that are occurring in this unprecedented time

, the reality of adding more tasks to your evolving list may be daunting. We’re here to help. Western Canada Highway News had the opportunity to connect with and learn from select financial institutions that are here to serve your business’s needs. As we continue to move forward and surpass the impacts of COVID-19, we wish you a healthy fiscal year and thank you for your dedicated service!

 Whether you’re just starting a business or looking to upgrade or expand on your existing fleet, you need to learn about the different financing options that are available to you and will benefit your company (in the short- and long-term).

Western Canada Highway News had the opportunity to connect with select financial institutions – the Canadian Finance & Leasing Association, CWB National Leasing, Dynamic Capital, Essex Lease, Hornoi Leasing, Jim Pattison Lease, Ocean Trailer, Prime Capital Group, Trailcon Leasing and Wells Fargo Equipment Finance – and discuss the features and benefits to buying, leasing and renting; what makes a good client; and with the current state of the economy, is this a good time to purchase or lease more and secure all needed equipment.

Buying, Leasing or Renting

To quote Miles Macdonell, Senior Vice President of Sales with CWB National Leasing, “Every business is unique and so are its financial needs.”

It’s important to have a strategy in place that aligns with your business model, short- and long-term goals for growth/advancement, return on investment and prepares you for unexpected dips and turns in the economy.

Angela Armstrong, President of Prime Capital Group, states, “For organizations using equipment, weathering economic storms has as much to do with using the right strategy for the right time, as it does making proactive ‘emergency stash’ decisions – but both play a role in the success of companies that survive, and thrive, despite the headwinds of whatever storm has blown in.”

There are a variety of ways to strategically acquire the equipment your business needs – based on your unique position, needs and overhead, including fuel and interest rates.

“When fuel costs are low, you have more margin to apply to the higher price of new equipment. When fuel costs are high, thinking about used equipment or rentals is a good way to mitigate the risk of fuel fluctuation that you can’t control,” says Armstrong.

Michael Rothe, President & Chief Executive Officer of the Canadian Finance & Leasing Association, states that it’s important to be proactive and create an equipment and vehicle management strategy.

“With a management strategy in hand, you can have a conversation with your financing partner about your business and what you require,” says Rothe. “A good finance partner can also address tax and cash flow requirements, market fluctuations and other factors that impact your business. Be prepared to work through the total payments and costs and review any clauses relating to late payment fees, responsibility if the equipment or vehicle is damaged or destroyed, and end of term options.”

When creating an equipment and vehicle management strategy, some things to consider are:

• plan how long you intend to use your vehicle or equipment;

• build in some needed flexibility;

• consider how projected growth will change equipment and vehicle requirements;

• understand the types of different financing options available; and

• assess the revenue potential of the new equipment or vehicle.

If You Rent

Mack Keay, Branch Manager for Ocean Trailer Winnipeg, states that renting is the best way to enter the market.

“If a company is trying something new, or they are not completely confident in the length of term they will be needing a certain type of equipment, the ability to return it without penalty is attractive,” says Keay. “Renting also does not require a high credit rating to be approved for new equipment. All taxes on rental equipment are 100% deductible as well. However, in the long term, rental payments do not go towards purchase of the unit at the end of a term. While monthly payments are normally similar to a lease, a company could rent a trailer for years and would still have to pay fair market value to buy it.”

Depending on your business’s needs and how big you need your fleet to be, generally and given a particular time, you have the option to rent any remaining trailers and the advantage to grow or shrink a fleet without penalties.

If You Buy

Angela Armstrong, Prime Capital Group, and Mack Keay, Ocean Trailer Winnipeg, both agree that buying is ideal if you have lots of money.

“When you buy for cash, you’re in control of what happens when you park it (other than insurance, possibly) since it’s your asset to worry about,” says Armstrong. “The downside is like what they say in real estate, ‘you can’t eat a doorknob’ – the classic ‘house poor’ problem. You can always sell your truck, and some do that when they see the market turn but getting the right timing for price of used equipment depends on markets, just like fuel and asset prices.”

“For established companies that are confident they will be using equipment for most of its useful life, buying high quality equipment can be an additional source of revenue when it is time to re-sell it. But if their business all of a sudden changes, and a new trailer needs to be sold, there could be big losses. All new vehicles go down in value as soon as they leave the lot. There are also depreciation expenses to be shown on the balance sheet for owned assets,”
says Keay.

From an investment perspective, Dustin White, Chief Executive Officer of Dynamic Capital, states that “there are tax benefits when acquiring equipment when approaching your fiscal year-end due to the ‘half-year’ rule, a provision in the Income Tax Act that allows you to only claim half of the capital cost allowance (CCA) available for an asset in the year of its purchase.”

If You Lease

Mike Krell, Vice President of Sales & Marketing with Trailcon, states that leasing has room for customization to suit your business’s unique needs.

“The benefits [for leasing] include the ability to forecast cash flow, based on the amount and number of lease payments, and avoid asset obsolescence,” says Krell. “Leasing also allows customers to focus on their core business with no requirements to train or recruit technicians assuming a full maintenance lease. Perks of renting include the ability to adapt your fleet size so you always have the right equipment when you need it, however you may find it difficult to find the type of equipment you’re looking for on short notice.”

Mike Rusch, President of Jim Pattison Lease, states that leasing creates an advantage for cash flow in comparison to financing through the bank, especially when it comes to vehicle leasing.

“From an owner’s perspective, leasing provides a significant cash flow advantage over straight bank financing. Simply stated, a proper lease payment will reflect the expected usage of the vehicle. You never pay more than what you will use,” says Rusch.

“As an example, for a $150,000 truck, a lease will save you over $30,000 in cash over a five-year term versus a straight finance by leaving a 25% residual balance outstanding at the end of the term. The residual is chosen to reflect the expected resale value and is impacted by mileage, damage, and wear and tear. Another advantage is the tax savings by spreading provincial sales tax or federal GST amounts over the life of the lease rather than as a bulk up front payment on a purchase.”

Rusch explains that leasing is another source of funding for business owners – one that doesn’t tie up other forms of secured or personally guaranteed lending.

“The lease is secured by the asset; therefore, you don’t need to sign personal guarantees or general security agreements against other assets in the business. Leasing can be an important source of funding for businesses.”

Vehicles depreciate over time, which makes leasing a popular choice for business owners who wish to match the depreciation with the leasing agreement rather than a purchase price.

According to Angela Armstrong, Prime Capital Group, more than 51% of businesses who used leasing to purchase equipment in Canada use it to acquire trucks and trailers.

Shawn Hornoi, President of Hornoi Leasing, states there are many benefits to consider when renting or leasing equipment, rather than buying.

“A large amount of working capital can get tied up in purchasing equipment,” says Hornoi. “Now more than ever, that money may need to be focused on other areas of business to increase profitability and to operate more productively. Full service leasing allows customers to fix their costs, avoid depreciation losses, and reserve their capital for company growth in other areas. When taxes increase, leasing fleet units is often a more affordable option. In some provinces, debt associated with a fleet of trucks can be included on the year-end balance sheet as taxable. Capital tax is not imposed on an operating lease. Leasing a fleet rather than purchasing also leaves customers with greater borrowing capacity on their business lines of credit.”

Peter Ringler, Executive Vice President with Wells Fargo Equipment Finance in Canada, states that when you lease, you should consider an equipment loan to assist in:

• purchasing assets, if ownership is important and aligns with your business strategy. An equipment loan is a good solution;

• ensuring operating lines of credit are preserved for working capital activities by financing term debt product;

• matching repayment terms to the cash flows expected from the asset; and

• diversifying lending sources, if the equipment loan is from a different provider than its operating financial institution.

 What Makes a Good Client

To quote Brian Jones, Business Development Manager of Essex Lease Financial Corporation, “A good client is upfront with all of their information – good, bad and the ugly – and one that communicates with the company during good and troubling times.”

Client-lender relationships are built on trust, transparency and open communication. Every business is different and its needs are unique; the client needs to do their homework, provide a full report of information – that paints a vivid picture of where their business is at and heading and addresses any obstacles along the way – and be a good communicator, who can state their needs and mutually work with their lender.

“Like any successful relationship, good communication and mutual understanding is key,” says Mike Krell, Trailcon.

Understanding the obstacles that they currently face helps to build the right solution. Full service leases offer just that: full service. We want to be able to properly service the customer.”

Peter Ringler, Wells Fargo Equipment Finance in Canada, explains that the more information you can provide, the more options their lenders can provide in a financing strategy.

“To better assist our clients, it is important that we understand the reasons for their preferred choice of financial product and requested terms, as well
as the intended use of the acquired assets.This enables us to have a clear understanding of what is most important to the client for their financial and growth goals,” says Ringler.

“Wells Fargo Equipment Finance typically requires the last three years of financial information as part of our underwriting process for an equipment financing transaction.

Wells Fargo can offer insights on financing options and provide meaningful guidance on developing an equipment financing strategy that suits each company’s goals. Much of our lending involves existing customers, so the due diligence at the beginning of the relationship results in a more efficient process for future transactions.”

The end goal is for businesses to be successful and establishing a long-term relationship between the client and lender is a big piece of that success.

“Relationships are the backbone of our client base, not just looking at the balance sheet or income statement…We look beyond the numbers to place an equal amount of emphasis on character, trust and building a long-term working relationship,” says Brian Jones, Essex Lease Financial Corporation. “We are not constrained by the restrictions placed on the big financial institutions, so we can adapt your financing to work within your business cycles and help you accomplish your goals.”

“Our customers build the gritty, hidden, supporting structures under our feet and behind our walls – the roads we drive on, the resources we build with – the fuel that provides energy that powers all the moving parts of our community. Essex provides equipment financing and leasing to help make that happen. We’re here to remove obstacles. To make things simple and to take care of the details so customers can focus on their business. Because when we clear the path for customers, we clear the path to a better future!”

 Our Economy and Determining
When to Buy and Secure Equipment

When the COVID-19 pandemic arrived in Canada, businesses had to adapt to survive and continue to operate. With the trucking industry being deemed an ‘essential service,’ carriers needed to act quickly to meet the ever-changing safety regulations to keep their operations staff and drivers safe while ensuring that deliveries were made, shelves were stocked and communities were served. From a financial standpoint, fleets need to be up and running with as little downtime as possible.

Working with a lender can alleviate some of the stress by managing your asset (though full service leasing) and ensuring the asset is maintained, repaired and operating at full capacity within your business’s needed timelines.

“More and more, companies cannot afford to dedicate the personnel required to effectively run and maintain a fleet. Also, the days of owning and maintaining older equipment from an equity standpoint is no longer viable as it has been in days passed. Even if a fleet customer were to purchase new units under warranty, they are still at risk to the added time required to manage these units through the repair and maintenance process,” says Shawn Hornoi, Hornoi Leasing. “With full service leasing, all [the client] needs to do is make one phone call. It is then our job to manage the asset through the repair process, and either expedite repairs to meet customers’ time line, or replace the downed unit so the customer’s fleet is always at full capacity.


All the customer worries about is getting their job done – not maintaining a fleet.”

Mike Rusch, Jim Pattison Lease, reaffirms that although the current economic outlook is uncertain, the recent moves by the Bank of Canada mean that interest rates have never been more competitive than they are right now.

“For businesses that are ready to get back to work and focus on continued growth, a leasing option can be very attractive. As well, the transportation of goods to distribution centres, home delivery, and courier segments are all seeing positive conditions right now,” says Rusch.

Dustin White, Dynamic Capital, confirms that there are always opportunities to take a hold of – even in this current economy.

“There will be opportune times in the current economy for those that plan for and see opportunity – from good pricing on equipment to companies for sale, those who are prepared to take advantage of these opportunities will end up stronger, as the economy as a whole begins to become increasingly stable,” says White.

Circling back to Miles Macdonell, CWB National Leasing’s statement about each business being unique – it’s true: “there’s no one-size-fits-all solution for businesses,” says Macdonnel. “Whether you’re looking to purchase or finance your business equipment, consulting with one of our equipment financing experts is a great place to start.”

 Your Financial Institutions

The Canadian Finance & Leasing Association (CFLA) is the only organization advocating the interests of the asset-based financing, vehicle and equipment leasing industry in Canada. Through CFLA, members help shape the industry’s future within the competitive financial services sector.

Established in 1993 through the merger of the Canadian Automotive Leasing Association (CALA) and the Equipment Lessors Association of Canada (ELAC), the Association has grown from an initial membership of 61 companies to over 220 companies today. To learn more, visit www.cfla-acfl.ca.

 CWB National Leasing, Canada’s largest and longest-standing equipment financing company, helps over 70,000 Canadian businesses secure the equipment they need to help their business grow. We offer financing services to equipment dealers across a broad range of sectors including commercial, agriculture, construction, transportation, forestry, health care, golf and turf. Our 60 sales managers and a broker network across Canada are supported from our head office in Winnipeg, Manitoba. Learn more at www.cwbnationalleasing.com.

 Dynamic Capital is a private Canadian Finance company that specializes in capex, refinance and working capital deals. In addition to having our funding lines, we also have long established relationships with our funding partners. Servicing the transportation, construction, oil and gas, mining and forestry sectors, we’re here to provide our clients with creative funding solutions, structured to their individual business needs. To learn more, visit www.dynamic-capital.ca.

 Since 1987, Essex Lease Financial Corporation has been a difference-maker for business across Western Canada. When you choose Essex, you’re not just choosing another financing company, you’re choosing an experienced ‘partner’ who understands your business and is genuinely committed to your success. To learn more, visit
www.elfc.ca.

 Excellence in what we do is the hallmark of a great business. At Hornoi Leasing Ltd., giving the best customer service has always been top priority and has resulted in customers who have come to expect and consistently receive only the best. To learn more, visit www.hornoileasing.com.

 Founded in 1961, Jim Pattison Lease is Canada’s largest privately owned vehicle leasing Company. With offices located across Canada, from Victoria to Halifax, we offer customers turnkey services for their vehicle needs. Our services include vehicle selection, flexible leasing structure, fuel and maintenance management, and vehicle remarketing. With a focus on customer satisfaction, Jim Pattison Lease has grown from one vehicle in 1961 to managing over 45,000 vehicles today. To learn more, visit www.jimpattisonlease.com.

 Ocean Trailer is the largest semi-trailer dealer in Western Canada with shops in seven locations. We are a third generation family owned and run business with over 8,000 rental trailers of all different types. The brands we represent are Utility, Fontaine, Wilson, Titan, Renn, CIMC Intermodal, and Felling. We offer in house leasing, long-term rentals (without a mileage charge), 24-hour minimum rentals (with a mileage charge), and sales. To learn more, visit www.oceantrailer.com.

 Prime Capital Group is an independent Canadian lending company focused on the lease and finance of equipment assets in Canada. We work companies across the country on helping them design custom payment plans to put productive, profitability-driving new and used equipment to work. From mom and pop to multinational, with a 20-year success track record and an experienced team with expertise in all sectors, our team loves helping businesses grow. Call us today at 780-437-5193 or apply online at www.pcclease.com/apply-now.

 Trailcon Leasing is Canada’s leader in transportation services, providing lease, rental and service Nationwide. With five locations, Trailcon has over 10,000 trailers and maintains over 10,000 customer-owned units, with the largest fleet of mobile mechanics in the country. We offer 24/7/365 service

with an in-house customer response centre, so your call never goes unanswered. To learn more, visit www.trailcon.com.

 Wells Fargo Equipment Finance, a Wells Fargo Commercial Capital division, provides competitive fixed- and floating-rate loans and leases covering a full range of commercial equipment for businesses nationwide as well as floor planning and inventory financing and vendor programs in selected industries in the United States and Canada. Wells Fargo Equipment Finance is a leading bank-affiliated equipment leasing and finance business in the United States by asset portfolio and annual originations, with more than 335,000 customers and 2,500 team members. To learn more, visit www.wellsfargo.com.

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