Canadian Equipment Finance

July/August 2013 • volume 1 • issue 3 | www.canadianequipmentfinance.com

Air Canada Reinvents Aircraft Financing: How the deal took flight, from the inside CFLA Convention Sneak Preview

Donald Gray, Blakes and David Shapiro, Air Canada

What you need to know now about the proposed lease accounting changes Factoring empowers entrepreneurs PM40050803

North America’s Independent Equipment Finance Company

We deliver financing where you sell equipment Element Financial Corporation’s equipment finance specialists have been responsible for creating and operating some of the world’s most successful vendor finance partnerships. We understand how to customize vendor financing solutions that work for equipment manufacturers, dealers and distributors across North America. With $2.1 billion in capital behind us, we're ready to put that independent expertise to work for you.

Element Financial Corporation Toronto, Ontario 1-877-534-0019 www.elementfinancial.ca Element Financial Corporation (USA) Horsham, Pennsylvania 267-960-4000 www.elementcorp.com

contents

ASSOCIATION REPORT:

July/August 2013 Volume 1 Number 3 Publisher and Editor-in-Chief Steve Lloyd steve@canadianequipmentfinance.com Creative Direction / Production Demigroup info@demigroup.com

ASSOCIATION REPORT:

Photographer Gary Tannyan Advertising Sales Mark Henry mark@canadianequipmentfinance.com Brent White brent@canadianequipmentfinance.com For subscription, circulation and change of address information, contact subscriptions@canadianequipmentfinance.com

Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to: Circulation Department

302-137 Main Street North Markham ON L3P 1Y2 t: 905.201.6600 • f: 905.201.6601 info@canadianequipmentfinance.com www.canadianequipmentfinance.com Subscriptions available for $40.00 year or $60.00 two years. 2012 Lloydmedia Inc. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Printed in Canada Reprint permission requests to use materials published in Canadian Equipment Finance should be directed to the publisher.

Also Publishers of

Payments Business www.paymentsbusiness.ca the Magazine of risk capital and credit.

Payments

Succession Planning

Achieving efficient payments processing

Call to action for Canadian private business owners

March / april 2012 • www.canadiantreasurer.coM

12

Conference Sneak Preview. The CFLA’s annual conference takes place on September 18-20 in Halifax, and we take an advance look at the key sessions, speakers, events and keynotes that you can expect to witness if you attend this year’s event. The association is celebrating its 40th anniversary this year and its annual conference is the industry’s key event. »5

20

Canadian Treasurer www.canadiantreasurer.com

In this issue’s ELFA report, we take a close look at what businesses need to know about changes to lease accounting. William Bosco goes inside the proposed changes that would dramatically affect the way leases are accounted for on corporate balance sheets. Must reading for any lessor. »6

FEATURES Bringing Legal Magic to Aircraft Financing: Air Canada’s First EETC Offering.

The story of Air Canada’s historic and precedent-setting EETC is really the confluence of two separate but equally interesting and important stories. »12

Factoring: Empowering Entrepreneurs by Self- Financing Your Company.

As the Canadian economy continues to move forward in a world of uncertainty and financial turmoil, many companies are faced with the everyday challenges of running a business. Every morning, business owners wake up to a day of financial challenges hindering their ability to expand their entrepreneurial talents. »18

Canada is Moving to The Cloud. Are You? Embrace it or try to ignore it, The Cloud is already changing cyberspace. When it comes to moving to The Cloud, it seems there are more questions than answers: Does cloud computing affect my business? Is The Cloud safe? How are privacy and sovereignty affected? Will my data reside in Canada? »23

Navigating a Basel III world

Contact Management www.contactmanagement.ca Collaboration wins in supply chain finance

Financing harder for small Canadian public companies

Direct Marketing www.dmn.ca

Maximizing Lessors’ Deficiency Claims When a default of an equipment lease occurs and the lessor seizes and sells its equipment, the lessor is usually left with a deficiency claim.

Such claims can be significant. Find out how to deal with this situation for maximum benefit. »24

Measuring Success for Equipment Leasing Software The success of your any leasing software implementation can mean different things depending who you ask. »26

OBSERVATIONS

An Appraiser’s Tale.

Often, what is right and true is a delicate valuation. When substantiating the value of equipment at the time of purchase, factors affecting value are often clearly identified. »30

NEWS A round up of the industry’s most significant developments from the past month. »9

EVENTS: Find out where to go and what to see in 2013. »29

PM40050803

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

3

Sample Head

4

CANADIAN EQUIPMENT FINANCE | MAY 2013 | canadianequipmentfinance.com

Association Report

NAVIGATING OUR NEW WORLD

CFLA Conference Halifax Marriott Harbourfront, September 18 – 20, 2013 40th Anniversary Conference Preview The Canadian Finance & Leasing Association (CFLA) represents the asset-based financing, equipment and vehicle leasing industry in Canada. This industry is the largest provider of debt financing in this country after the traditional lenders (banks and credit unions).

CFLA’s more than 200 company members range from large multinationals to national and smaller 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. The industry’s customers include Canadian small, medium and large businesses as well as consumers.

At its peak in 2007, the value of assets financed by the industry had risen to $105.4 billion (from $50 billion in 1998). But, with the worldwide economic crisis of 2008-2009, total assets financed in Canada declined to $80.8 billion Facilitating business investment in new machinery, equipment and vehicles enhances national productivity and lifts the living standards of all Canadians. The asset-based financing industry was directly responsible for raising living standards by 2.3% between 1992 and 2002 (or about 8% of the total increase in living standards over that decade).

CFLA members are key partners with Canadian businesses and consumers. Assetbased financing touches virtually every business and consumer in Canada.

The association is celebrating its 40th anniversary this year, and its annual conference is the industry’s most prestigious and important event.

Here’s a sneak preview of what you can expect this year.

Program Preview 8:30 – 8:45 a.m.

Chairman’s Welcome Jeff Hartley, Foss National Leasing

8:45 – 10:00 a.m.

Economic Update Sponsored by: Jim Pattison Lease Uncertainty remains. What is the near and mid-term outlook for Canada, the US, Europe, China and the rest of the world? Will there be growth? What about interest rates? The Canadian exchange rate? Provincial growth prospects? How will it all impact Canada and its businesses?

Speaker: Sherry Cooper, former Executive Vice-President and Chief Economist, BMO Financial Group.

10:30 – 12 noon

Navigating Our New World What is happening beyond Canada’s

borders? How is the asset-based financing industry faring in Europe and the USA? The incoming Chairs of the UK Finance & Leasing Association and of the U.S. Equipment Leasing and Finance Association will discuss the current state of the industry and its challenges in conversation with Hugh Swandel.

Speakers: George Ashworth, incoming Chair, FLA, Director, Leaseurope, and Managing Director, Asset Finance, Aldermore Adam Warner, incoming Chair, ELFA, and President, Key Equipment Finance Hugh Swandel, immediate past President, U.S. National Equipment Finance Association, Director, CFLA, and Managing Director – Canada, The Alta Group Continued on page 21

Financing bundled transactions and managed services in a hell-or-high water environment Attend this session and you will discover if there is a method of combining both services and equipment into a single contract and whether this bundled agreement can be assigned to a finance source. As more service providers are providing a single source solutions for their client’s needs they desire to move to a bundled contract that combines both the equipment and service component into a single payment structure. Many of these solutions , however , require an upfront acquisition of equipment for which the service provider requires financing . The challenge to the service provider is to develop a solution that will meet both its client’s needs as well those of the financing source. This session will look at the trends in bundled contracts in the industry as a whole and the structures that can be used to obtaining financing for these contract. Participants will be provided with the credit criteria that banks are looking for and certain legal structures that may work to assist in obtaining financing .

Jonathan Fleisher, Cassels Brock and Blackwell LLP Douglas McKenzie, BAL Global Finance Canada Corporation

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

5

ASSOCIATION REPORT

What Businesses Need to Know About Changes to Lease Accounting

By William Bosco

ou may have heard about a proposal that would change how leases are accounted for on corporate balance sheets. If your company leases or finances equipment, you should be aware of how the proposal could change the way you account for leases, how it potentially impacts your business, and what you can do make your voice heard on the proposal.

Many companies—both in the U.S. and worldwide—and across a wide spectrum of industries lease equipment and real estate as part of their day-to-day operations. Currently, operating leases are not reported on these companies’ balance sheets; they are typically included in the footnotes of financial statements. As part of the global effort to establish uniform corporate financial accounting standards, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued a proposal for a new lease accounting standard on May 16, 2013. The Boards’ intent is to record these transactions on balance sheet (i.e., capitalize all leases with lease terms of more than one year on lessees’ books). Stakeholders have until Sept. 13, 2013, to comment on the proposal.

Y

What’s in the proposal?

The primary components of the proposals are the following: ◉◉ The current risk-reward model, which distinguishes a capital lease from an operating lease, would be replaced with a so-called Right of Use 6

approach. Under this model, the lessee would account for the lease contract’s rights and obligations as assets and liabilities, using a method similar to capital lease accounting for virtually all equipment leases. ◉◉ Two types of leases would be recognized: some would be accounted for as financing arrangements, similar to a loan, and others treated like rentals. The distinction would depend on how much of the leased item is consumed during the term of the lease. Leases of buildings and property would be treated like rentals, while equipment leases (including aircraft assets) would be considered financing contracts. ◉◉ With this equipment vs. real estate classification split, the expense related to the former would be front-loaded, similar to interest in a mortgage financing, while the lease expense in the latter type of lease would be recognized as it is today with operating leases, on a straight-line basis. ◉◉ Lessors would use either operating lease accounting for straight-line leases or a finance-lease-like method called the receivable and residual approach, which would include frontloaded lease expense. As in lessee accounting, the method used would be determined by the amount of the leased item that would be used up during the term of the lease.

How will the proposal impact businesses?

Estimates are that U.S. public companies

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

have more than $1.3 trillion in operating lease payments that will be brought on balance sheets, adding assets and liabilities.

Many businesses do not object to having to record leases on their books.

Rather, they object to how the proposal would require them to account for and report lease transactions, contending that aspects of the proposal are too complex, impose burdensome regulation on businesses and do not accurately reflect the economics of the lease transaction. If the proposed changes do not reflect an appropriate balancing of costs and benefits, they could result in an unwarranted increase in cost of capital to all companies that utilize leasing.

Asset-intensive industries—including rail, airline and manufacturing—would be significantly impacted by the proposed changes to lease accounting. Under the proposal, the present value of the lease rents will be recorded by the lessee as an asset and liability. The profit-and-loss pattern will not represent the economic nature of a rental agreement, as lease expense will be front-loaded. This will increase the cost of leasing in the early years of the contract and will not match the periodic rental payments under the lease.

For lessors in the United States, lease pricing would increase due to the loss of leveraged lease accounting, as they will be forced to add non-recourse debt to their balance sheets. This change in accounting does not match the lessors’ economics in a leveraged lease and ultimately will result in less availability of leases and higher lease rates.

What can businesses do?

There is a 120-day comment period.

Lessees and lessee groups and their financing partners should submit a comment letter prior to the Sept. 13, 2013, deadline. Only then will the standards-setting bodies be aware of the real-life business impact if these rules changes are adopted. A link to the Exposure Draft and tips for submitting an effective comment letter are available on the Equipment Leasing and Finance Association’s website at www.elfaonline. org/Issues/Accounting/. This guidance

Sample Head

COMMENTS ON THE PREMIER ISSUE. Wanted to let you know that it looks great and content is of value.

Congrats!!!

Love the magazine!!!

Good job Steve!!!

Already has some great feedback!

J. Anthony Zambon, PayNet Inc

Rob Birnie, Verus Valuations

I was pleased to receive your premier issue. I am hosting a meeting aof a Lessor study group, similar to a dealer 20 group in Toronto next month and I would like to give the members a copy of your magazine.

Thanks for sending your kickoff publication. Arrived today. Greatly appreciated.

Well done !!

David Hill, Dominion Leasing Software

The magazine looks great. Very professional - and nice, clean look Yash Mody, Orchid Leasing

Received your inaugural edition of Canadian Equipment Finance. The issue looks well done and packed with valuable information on the industry.

Congratulations on a successful launch

I found the Premier issue awaiting my arrival at the office today. I must say it looks terrific!

David Chaiton, Torkin Manes

Doug Moore SommervilleAuto Ltd

Congratulations on your first issue!

Bill Phelan, PayNet Inc

Fantastic publication-looks spectacular-Jamie Born, PayNet

Amy Vogt, Equipment Leasing & Finance Association

Visit us online at www.canadianequipmentfinance.com Canadian Equipment Finance is a Lloydmedia, Inc publication.

Lloydmedia also publishes Payments Business magazine, Canadian Treasurer magazine, Direct Marketing magazine and Contact Management magazine. canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

7

Association Report

Leases account for hundreds of billions of dollars in equipment acquisition annually on submitting a comment letter is fairly detailed. In general, however, companies wishing to comment may consider including the following points: 1. A straight-line expense pattern for profit-and-loss reporting more truly reflects the economics of a true lease/operating lease.

2. Lease classification and balance sheet presentation based on the legal treatment in bankruptcy of leases is important for users of financial statements.

3. An unnecessarily complex set of accounting rules is not in the best interest of businesses wishing to sustain themselves in a challenging

8

economic environment.

Conclusion Leases account for hundreds of billions of dollars in equipment acquisition annually, contributing not only to businesses’ success, but also to economic growth, manufacturing and jobs. The good news is that there are many benefits to leasing, and the primary reasons to lease equipment will remain intact despite the lease accounting proposal, from maintaining cash flow, to preserving capital, to obtaining flexible financial solutions, to avoiding obsolescence.

But, it is essential that the Boards

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

carefully consider comprehensive public input and comment before finalizing their proposal to ensure a workable lease accounting standard. It is our hope that the Boards will seriously consider the negative consequences of some of these proposals and ultimately arrive at alternative approaches that do not harm businesses and impair the broader economies in the U.S. and elsewhere around the globe.

About the Author. William G. Sutton, CAE, is President and CEO of the Equipment Leasing and Finance Association, the trade association that represents companies in the $725 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA has been equipping business for success for more than 50 years.

About the author: William Bosco, a member of the IASB/FASB International Working Group on lease accounting and an accounting policy consultant for ELFA, contributed to this article.

news digest

8

For breaking news and in depth news features, visit our website at www.canadianequipmentfinance.com

Transat A.T. Inc. announces agreement to lease four Boeing B737800s and to renew the leases of six Airbus A330s MONTREAL--Transat A.T. Inc. announces the signing of an agreement with the U.S.-based International Lease Finance Corporation (ILFC) for the long-term (eight-year) leasing of four Boeing B737-800 aircraft. These planes will be introduced in summer 2014 and become the core of Air Transat’s permanent narrow-body fleet. They will be used on sun-destination routes to Mexico, the Caribbean and Florida. The agreement also includes the renewal through 2020 and 2021 of the leases on six Airbus A330 aircraft—three A330-200s and A330-300s—with improved terms.

The three long-range A330-200s were originally to be phased out of the fleet. Transat and ILFC, however, reached an agreement that will enable Transat to achieve its objective of reducing costs, and that, in the case of these aircraft, will prove more advantageous than the seasonal subcontracting arrangement originally envisioned.

The agreement is in keeping with Transat’s previously announced plan to internalize its operations using narrow-body aircraft (it has relied on outside aircraft since 2003), and to deploy a so-called accordion fleet that enables it to adjust the number of narrow- and wide-body jets at its disposal according to seasonal tourism market needs. Generally speaking, Transat has greater need for narrow-body aircraft in winter, when Canadian travellers favour medium-haul sun destinations, and greater need for widebody jets in summer, when the transatlantic market is busiest.

“This is an important step in the implementation of a fleet that is adaptable to seasonal needs,” said Jean-Marc Eustache, President and Chief Executive Officer of Transat, adding: “This deal gives us greater flexibility and a significantly enhanced cost structure. This strategy is key to our future success and to a return to profitability in winter, and will also ensure that we maintain the high quality of our products and our customer experience.”

ILFC Chief Executive Officer Henri Courpron commented, “Air Transat has been a long standing customer of ILFC. We believe in their business strategy and view them as a partner. With this transaction, we will extend and grow the strong relationship between our two companies.”

ELFA: June New Business Up 8 Percent Year-overyear, Up 15 Percent Month-to-month Washington--The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $725 billion equipment finance sector, showed their overall new business volume for June was $8.6 billion, up 8 percent compared to volume in June 2012. Month-over-month, new business volume was up 15 percent from May. Year to date, cumulative new business volume increased 10 percent compared to 2012.

Receivables over 30 days were at 1.4 percent in June, reaching a new historic low, down from 1.6 percent in May. Delinquencies declined from 2.4 percent in the same period in 2012. Charge-offs were unchanged for the past four months at the all-time low of 0.3 percent.

Credit approvals totaled 78.5 percent in June, relatively unchanged from May. Fifty-four percent of participating organizations reported submitting more transactions for approval during June, down from 63 percent the previous month.

Finally, total headcount for equipment finance companies was relatively unchanged from the previous month, and up one percent year over year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for July is 59.4, an increase from the June index of 57.3, reflecting industry participants’ increasing optimism despite continued moderate demand for equipment.

ELFA President and CEO William G. Sutton, CAE, said: “Businesses continue to increase spending on capital equipment as evidenced by U.S. government statistics showing three consecutive months’ increase in durable goods orders by American firms. Our June MLFI-25 data confirms this trend: the amount of leasing and financing of business equipment and software continues to grow, while the credit quality of these transactions remains at historic highs. Member companies are optimistic that this trend will continue into the summer months and beyond.”

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

9

news digest

Canadian commercial lending rises in first quarter

By John Tilak, Reuters

TORONTO--Commercial borrowing by small and medium-sized businesses in Canada climbed in the first quarter, driven by robust domestic and global demand, a PayNet survey shows.

PayNet, which tracks commercial financing for millions of North American small and medium-sized businesses, said its Canadian Business Lending Index rose to 194, the highest level since it was created in 2005.

The index rose 4 percent in the first quarter from the fourth quarter and was up 29 percent year-over-year.

“The demand for our goods and services, and our resources is definitely fueling the increase in investment

Orchid Leasing Corporation

by Canadian businesses,” Anthony Zambon, director of PayNet Canada, said.

“The data shows small- and mediumsized businesses are resilient and continuing to invest, with the prospect of supporting economic growth in the near future.”

Small- and mid-sized businesses have been stepping up investment in the construction of plants and commercial buildings and in machinery and equipment, he added.

The advance marked the 10th consecutive quarter of growth since the index bottomed out in 2010, and the seventh straight double-digit advance on a year-over-year basis.

The PayNet data, which tracks lending

Funding Transport Businesses

YOUR SOURCE OF CAPITAL FOR TRUCK AND TRAILER LEASES ACROSS ONTARIO, MANITOBA, SASKATCHEWAN AND ALBERTA

E NABLING L OGISTIC B USINESSES T O B LOOM

info@orchidleasing.com - www.orchidleasing.com - 1-855-712-3828 10

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

across sectors including manufacturing, retail and transportation, showed that commercial loan growth in Canada outstripped growth in the United States.

“The U.S. was been wallowing,” Zambon said. “The growth trend of investment by U.S. private companies is slowing. The U.S. small business lending index has fallen for the third month in a row.”

The commercial lenders include independent finance companies, big banks and nonbank players such as machinery makers, whose loans and leases to customers are secured against the equipment sold.

PayNet’s Canadian unit collects data on more than 700,000 loan contracts worth more than US$47 billion.

news digest

SNAP Financial Group selects LeaseWave VANCOUVER--SNAP Financial Group has selected LeaseWave lease and loan management software by Odessa Technologies, Inc. to automate and administer their back office processes. The SNAP Financial Group of Companies includes various origination companies including; SNAP Home Finance, SNAP Commercial Finance, SNAP Auto Finance, and SNAP Premium Finance.

“SNAP is focused on the origination of small ticket transactions in markets where delivery of custom financial solutions is a critical value-added component of our sales proposition” says Kyle Wenn, COO at SNAP. “Cost effective servicing is critical to our success.

2

Through seamless integration with diverse systems, automated processes and bulk servicing capabilities, LeaseWave will enable us to create a highly efficient platform and optimize our business model.”

“Successful execution of SNAP’s innovative growth strategy requires both replacement of their legacy systems with state of the art technology, and significant business process reengineering” says Michael Morris, Project Manager at Odessa. “Given the depth of our lease consulting expertise and the level of automation LeaseWave is capable of, Odessa is well positioned to help SNAP achieve their growth objectives.”

SNAP Financial Group is a leading

Canadian provider of tailored financial solutions that empower its partners through a unique set of origination companies including; SNAP Auto Finance, SNAP Home Finance, SNAP Commercial Finance and SNAP Premium Finance.

Odessa Technologies is a software company exclusively focused on the leasing industry. Odessa is the developer of the LeaseWave suite of products, a fully integrated browser-based lease and loan management solution, providing an end-to-end origination and portfolio management system for equipment leasing and finance, vehicle leasing and fleet management companies.

To send press announcements, please direct them to Steve Lloyd, Editor in Chief, at steve@canadianequipmentfinance.com

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

11

Feature Report

Bringing Legal “Magic” To Aircraft Financing: Air Canada’s First Eetc Offering

By Donald G. Gray, Head, Aircraft Financing, Blake, Cassels & Graydon LLP, and David J. Shapiro, Senior Vice President and Chief Legal Officer, Air Canada

INTRODUCTION ow is it that U.S. major airlines with poor corporate ratings, or even recently in the case of American Airlines, while in bankruptcy, can issue investment grade debt to finance their aircraft fleets? That is the “magic” of the U.S. Enhanced Equipment Trust Certificate (EETC) structure. In early 2013, American issued $700 million of debt while in bankruptcy at rates of 4.0% and 5.625% to finance 13 new and used airliners. That was the latest in a long line of U.S. airline EETCs which have provided billions of dollars of very low cost asset-based financing for new and used aircraft over the past 20 years.

In 1999/2000, Air France and IBERIA were the first non-U.S. airlines that tried to tap this market but, because of legal uncertainties, particularly in respect of enforcement against airlines in bankruptcy under French and Spanish

H

12

law, their transactions, while structurally similar to U.S. airline EETCs, were economically dissimilar; they were significantly more expensive than the U.S. transactions and the alternatives available to them and were, therefore, not repeated.

How then was Air Canada, in May of this year, able to finance a billion dollars’ worth of new Boeing 777-300ERs at a blended rate of 4.66%, which is, by a large margin, the lowest cost financing that Air Canada has ever obtained for its aircraft and a rate highly competitive with rates on US airline issued EETCs? The story of Air Canada’s historic and precedent-setting EETC is really the confluence of two separate but equally interesting and important stories: first, how EETCs have revolutionized the financing of aircraft for major U.S. airlines and, second, how the Cape Town Convention, if implemented properly

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

Feature Report

Donald Gray (right) and David Shapiro worked their magic to make it happen canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

13

Feature Report

in applicable countries, can and will deliver major financial benefits to the world’s airlines, as predicted when the project was revitalised in the mid 1990’s with the support of aviation financiers, manufacturers, lessors, and initially a very few airlines, led in large part by Air Canada.

A. EETCs EETCs are U.S. capital markets products which really use legal structuring “magic” to create “something out of (what might appear at first look to be) nothing” (or, perhaps more accurately, “something much more out of much less”). The EETC structure was developed in 1993 by Tom Cahill and the other creative minds at Morgan Stanley. It is a structure that utilizes a combination of legal and financial enhancements to create investment grade debt issues from U.S. airlines which generally have corporate ratings which are well below investment grade.

Each EETC Certificate represents an interest in a pass through trust. Funds raised in relation to the offering are used by the trusts to acquire equipment notes. These equipment notes are in turn used to acquire the aircraft, which are used as security for the equipment notes. In the case of the Air Canada offering, a special purpose vehicle was established to acquire title to the aircraft and to conditionally sell the aircraft to the airline. The installment payments under each conditional sale agreement are passed on to investors as interest and principal on the certificates.

EETC offerings are divided into different classes with differing profiles.

Senior ranking certificates hold a higher position in the distribution of proceeds and, consequently, receive a lower rate of return than lower-ranking, higher risk, certificate classes. Air Canada’s EETC offering included Class A, Class B and Class C certificates.

EETCs are securities that: ◉◉ rely on the credit of a single corporate issuer, and ◉◉ are secured by aircraft as collateral.

Legal/structural enhancements which are utilized to provide the required 14

corporate ratings upgrades for EETCs include: ◉◉ structural enhancements to provide improved loan-to-value (LTV) ratios for the more senior tranches, and ◉◉ a liquidity facility from an independent highly rated bank or banks to provide up to 18 months (for U.S. Airlines and, now, Air Canada and, most recently, British Airways) to be utilized in the event of any missed interest payments for senior-rated EETC certificates.

An EETC transaction is essentially a single corporate credit aircraft mortgage/ lease securitization, with a security interest in the aircraft enabling a very high recovery rate if the airline defaults. EETC certificate holders have received almost 100% recovery in the various U.S. airline bankruptcies.

B. Section 1110 of the U.S. Bankruptcy Code: Enhanced Protection for U.S. Aircraft Creditors Many industry observers believe that most major U.S. airlines would not exist

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

today (because the capital required by them would not have been available) without the special protections provided to their aircraft creditors by Section 1110 of the U.S. Bankruptcy Code (Section 1110).

The development of Section 1110 may be summarized as follows: ◉◉ 1957 - U.S. Bankruptcy Code began to treat aircraft favourably, ◉◉ 1979 - real boost came with S. 1110 special aircraft protections – the airline has 60 days to cure and “affirm” the aircraft financing transaction or must permit repossession (assuming no negotiated settlement), and ◉◉ 1994 - S. 1110 amended to strengthen provisions.

Moody’s had given a one notch upgrade over unsecured ratings to Section 1110 protected transactions. After the 1994 amendments, the Section 1110 upgrade moved to two notches.

C. (a) CTC (International) What is now the Cape Town Convention

Feature Report

on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (together, Cape Town or the Convention) began in 1988 as a Canadian suggestion from Professor Ronald Cummings, of the University of Saskatchewan, to his colleague, Professor Sir Roy Goode of Oxford University, who were working together on the UNIDROIT Conventions on Financial Leasing and Factoring. The initial idea was to replace the lex situs rule (which before the UCC/PPSA regime had governed all personal property, including mobile property), with the “location of the debtor” rule, which obviously is far more practical for mobile assets operating in multiple jurisdictions, such as aircraft. The idea was submitted in concept to UNIDROIT in Rome for consideration as a future project.

UNIDROIT liked the idea, but lacked the resources to move it ahead. UNIDROIT, therefore, told the aviation industry that

if the industry provided the resources to prepare the treaty it could be done under UNIDROIT auspices. Accordingly, in 1994, the Aviation Working Group (“AWG”) was formed by Boeing and Airbus to provide the logistical support necessary to prepare and submit a treaty that would be acceptable to financiers and operators of high-value mobile equipment. The AWG now includes most aircraft and engine manufacturers and financiers, and has undertaken a large number of projects of interest to the aviation industry, but its principal priority remains the implementation of Cape Town on a worldwide basis.

Three international sessions where then held, two in Rome and one in Montreal, under the joint auspices of UNIDROIT and ICAO. The project quickly expanded to include the concept of an international registry for registrations of security interests (and searches) against aircraft and aircraft engines, and uniformity of certain basic remedies for enforcement. Notably, it also included the internationalization of Section 1110 (known as Alternative A in the treaty) which had long benefitted U.S. airlines, providing them a distinct advantage in their efforts to finance and refinance, and access capital, particularly during times of financial stress.

Early on, the AWG realized the value of bringing the airline industry, as represented by IATA, on board with the project. At first look, the treaty’s principal objectives appeared to many airlines to benefit mainly airliner financiers in enforcement against aircraft, thereby eliciting little support from airline borrowers. However, scratching below the surface revealed to more sophisticated observers that the treaty’s enhancement of predictable and timely enforcement against aircraft assets would reward airlines with greater availability and lower cost of financing for their aircraft. Air Canada, through David Shapiro, then senior aircraft financing counsel at Air Canada and coauthor of this paper, was one of the first major international airlines to recognize the inherent value of this treaty. Mr. Shapiro spoke on behalf of IATA at the

Montreal session affirming why such a treaty would be critically important to the airline industry in future. Air Canada recognized that many of the low-cost financings available to its U.S. counterparts were largely driven by the benefits of Section 1110, placing all other airlines at a competitive disadvantage. In 2002, with strong Air Canada support, IATA, in its Annual Report stated: “This [Cape Town]achievement crowns many years of effort by IATA... the benefits should be felt soon. Those benefits are: reduced risk of credit financing and therefore diminished costs of financing aircraft, greater access to financing... and improved ability to dispose of used aircraft.”

Alternative A was designed to be an enhanced version of Section 1110.

Specifically, Alternative A does not include some of the qualifying issues faced for Section 1110 benefits in the U.S. and also requires, as a condition for the continuing stay, that: (i) the aircraft be maintained pursuant to the requirements of the applicable contract during the stay period and (ii) the value of the aircraft be preserved during the stay period.

Cape Town was the first treaty prepared almost exclusively by commercial interests and it has achieved remarkable international acceptance to date. The treaty was concluded in 2001, became effective internationally in 2005 and now has 51 ratifications around the world.

(b) CTC in Canada The Canadian delegation to the UNIDROIT sessions (which included both of the authors of this paper: David Shapiro, now Senior Vice President and Chief Legal Officer at Air Canada, and Donald Gray, now Head of Aircraft Finance at Blake, Cassels & Graydon LLP, as its “aircraft financing experts”) was second only to the U.S. delegation (notable also for the absence of US airline participation) in its active participation in and support for the treaty preparation process. Both authors were members of

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

15

Feature Report the various treaty drafting groups and Donald Gray chaired the Insolvency SubGroup that prepared Alternative A. On April 1, 2013, Canada ratified Cape Town; a step that was more than a decade in the making. After it provided its formal signature to the Convention on March 31, 2004, Canada’s progress towards ratification was slow. On February 24, 2005, the Federal Government enacted, but did not fully proclaim, the International Interests in Mobile Equipment (aircraft equipment) Act (Canada) (the CTC Act). The CTC Act is the federal implementing legislation for the Convention; a necessary requirement, along with similar provincial and territorial implementing legislation, to make Cape Town law in Canada.

On September 28, 2005, in an effort to rectify this disadvantage caused by the failure to fully ratify Cape Town, Canada amended each of the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-up and Restructuring Act (Canada) by proclaiming in force those parts of the CTC Act which essentially mirrored Section 1110 and Alternative A. On January 22, 2008, there was a meeting in Ottawa among Canadian aviation industry representatives, certain financiers of Canadian airlines, including Boeing and the U.S. Export-Import Bank, and the Federal and Provincial Governments to discuss the further implementation of the Convention.

The Federal Government offered the aviation industry two choices: proclaim the Convention in force immediately without the preferred treaty declarations, including Alternative A, or wait to proclaim the Convention into force until such time as existing legislation could be amended to accommodate those declarations. The Canadian aviation industry representatives unanimously selected the latter course of action.

Accordingly, over the next five years and several meetings with industry representatives, the Federal Government began to amend the potentially conflicting statutes which would allow the Federal Government and the various provinces and territories to fully proclaim 16

the CTC Act and ratify Cape Town in Canada. It also amended the CTC Act to exclude certain public law issues, such as U.N. obligations and terrorism sanctions, from the primacy of Cape Town. On December 21, 2012, Canada deposited its signatures for ratification with UNIDROIT and, simultaneously, fully proclaimed the CTC Act, finally giving Canadian airlines access to the full benefits of Cape Town effective on April 1, 2013.

D. Air Canada EETC 2013-1 In 2004, the authors approached Standard and Poor’s in New York about the possibility of rating an Air Canada EETC for Air Canada’s upcoming Boeing 777 deliveries, but were advised that, because of the unavailability of Section 1110 in Canada and because a “hostile” stay against aircraft creditors could, in theory (although an extremely remote risk in practice), extend indefinitely under Canadian bankruptcy law, the costs of such a transaction, including a long liquidity facility and/or repossession facility, would be uncompetitive and in excess of the costs paid by Air Canada’s U.S. competitors. So, for the time being, the project was shelved.

With the pending Canadian ratification of Cape Town referred to above, and Air Canada’s next wave of scheduled Boeing 777 and 787 deliveries coming, all three of the major U.S. rating agencies were again approached in 2011 and 2012, as were all six of the major U.S. EETC banks, with a favourable update of Canadian law as supplemented by Cape Town with all of the most creditorfriendly treaty declarations. Air Canada in the Fall of 2012 decided to conduct an RFP process for the EETC banks.

Shortly thereafter, Morgan Stanley and Credit Suisse, which also has an extensive history with EETC’s dating back to the original EETC issuances, were selected to co-lead and manage the transaction. Citi and Deutsche Bank were subsequently added as bookrunners. After a separate RFP process, Natixis was selected as liquidity facility provider.

Air Canada elected to have the transaction rated by all three rating agencies and received excellent results.

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

Key to the transaction’s success was the nature of Canada’s legal system and the form in which it has adopted Cape Town and Alternative A. Cape Town as adopted in Canada was deemed by the rating agencies as the functional equivalent of Section 1110. Particular points highlighted by the agencies included the fact that the Canadian legislation explicitly states that the treaty supersedes all existing laws (with certain narrow exceptions) and even goes further than Section 1110 in protecting creditors, by explicitly obliging a Canadian airline and the Canadian government to assist creditors in the deregistration and export of the aircraft and requiring the airline to preserve the aircraft and its value in accordance with the financing agreement during the 60- day stay period.

These points allowed the rating agencies to unanimously give Cape Town (as implemented in Canada only) equal notching benefit to that given to Section 1110 in the U.S. from a legal enforceability aspect. Consequently, Air Canada’s EETC was able to be on par with the U.S. carriers from a structural perspective, without the need for any additional enhancements (such as a 24 month liquidity facility as required in the Doric/Emirates EETC transaction in 2012).

Air Canada’s high quality collateral, the five Boeing 777-300ERs financed for only the second time through a EETC, and its effective capital structure which employed three tranches of debt with initial LTVs of 48.9%, 69.5% and 82.3%, allowed the company to achieve historic notching uplift from the rating agencies without sacrificing duration or total proceeds raised. Moody’s, Standard & Poor’s and Fitch Ratings each gave the transaction their highest notching benefits for the A Tranche, +7 / +9 / +9 (M / S / F), giving the Class A certificates three investment grade ratings and an NAIC 1 designation.

All in all, Cape Town in Canada, plus the EETC structure About the Authors: Donald Gray is Head of Blakes’ International Aircraft Financing practice. David Shapiro is Senior Vice President and Chief Legal Officer at Air Canada. The authors would like to thank Anna Maria Masciotra, Senior Counsel & Managing Attorney, Aircraft Financing, who headed the Air Canada EETC execution team, and Jason MacIntyre and Auriol Marasco, of Blakes’ Aviation Group, for their assistance with this paper.

Lloydmedia, Inc, #302-137 Main St N, Markham, ON L3P 1Y2

4 MAGAZINES DELIVER your AUDIENCE in PRINT and ONLINE Access more than 57,000 prospects authorizing and approving expenditures in the

boardroom, on the front lines, in the IT corridors, in the centres of support and ful�illment, on the road with delivery, to create customer loyalty. Our readers link you to all the right executives and managers in FOUR KEY ROLES at the largest and fastest growing companies in Canada.

FUND Finance & Credit Prospects via CANADIAN TREASURER CT is published bi-monthly and reaches more than 10,000 readers, in about 6,000 organizations, who are responsible for capital, credit and risk in all forms of financial operations. Readers are in charge of corporate finances and how funding is approved, obtained, budgeted, loaned, processed, allocated, and distributed.

www.canadiantreasurer.com

SELL Marketing & Sales via DIRECT MARKETING

Published monthly since October 1988, DM is Canada's magazine for interactive marketing and sales, reaching about 17,000 readers in marketing and sales at about 6,400 organizations.

Readers devise strategies, create campaigns, choose media, select tactics, implement programs, track response, analyze results, measure ROI, and generate sales for their companies.

www.dmn.ca

PAY Transactions & Billings via PAYMENTS BUSINESS

Published bi-monthly, PB reaches more than 20,000 readers in the transactions, cards and ebilling/epayments sector at about 9,000 of Canada’s largest corporations including banks, credit unions, retailers and online sellers.

www.paymentsbusiness.ca

SERVICE Customer Service, IT & Fulfillment via CONTACT MANAGEMENT

CM is published quarterly and reaches more than 10,000 readers in about 5,000 call centres across Canada. Readers manage all forms of customer interaction and engagement, including outsourcers who conduct those activities on behalf of their clients.

www.contactmanagement.ca

TO ADVERTISE OR GET MORE INFORMATION AND MEDIA KITS 905-201-6600 | 1-800-668-1838 Mark Henry x223 | Brent White x222

FUNDING REPORT

Factoring:

Empowering entrepreneurs by self-financing your company

By Oscar A. Rombola

As the Canadian economy continues to move forward in a world of uncertainty and financial turmoil, many companies are faced with the everyday challenges of running a business.

Every morning, business owners wake up to a day of financial challenges hindering their ability to expand their entrepreneurial talents. The dream of carrying on your own business can only be achieved when the products you offer are delivered, invoiced and paid in full.

Before then, the business is technically with assets, but with “no cash flow”.

Waiting to receive payments could be a daunting exercise, especially when your own payables are lagging behind.

Thousands of business, in Canada, struggle to develop new clients, that one “great account” that would bring prosperity to your company. We develop relationships hoping to establish business based on reciprocity. One party delivers the goods, another one pay for them in a timely manner. The reality of this 18

equation has to do with a much more complex reality. Most business play “bank” with their clients, except this game does not include charging for extending credit terms. Companies are taking longer to pay and suppliers get caught in between having accounts receivables, having new orders to fill and a very tight cash flow. When does it end?

Financial institutions are reluctantly offering lines of credit to business, mostly considering their industries and years in business. Capped limits hinder the possibility of a thriving company reaching its sales goals. Lines of Credit are called and companies are left stranded to find new sources of financing.

Factoring, is the assignment and sale of invoices, an asset of the company, to a Factor at a discounted rate. Factoring has been around for hundreds of years, most popular in Europe and then in the colonies. Now a days , Factoring takes a preferred placed with companies experiencing significant growth due to increasing sales.

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

FUNDING REPORT

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

19

FUNDING REPORT Factoring, is also known as account receivables financing and it differentiates from other financing instruments because when you “factor” your invoices, you are not “borrowing” funds, but you are selling an asset of the company. This is an important difference since “you” not the “bank” have complete control of how many or how much you need to factor, according to the balance of the book of accounts receivables. Most factoring companies would allow the client to submit as many invoices as cash needed, of course, having access to immediate cash ( 24 hours or less) temps many entrepreneurs to submit all of the receivables.

Amongst the many advantages, Factoring companies provide elaborate “On Line” services that allow the client to check on the status of the receivables collection, credit worthiness of potential debtors , and average payment days for existing clients. Factoring companies may also provide reports such as ; payment behaviours and debtor’s concentration in the portfolio. This sort of information provide essential elements to make informed decisions when negotiating with your clients. Factoring companies have evolved over the years, accounts receivables management is an integral part of the service these days.

Setting up an account should not be an onerous task. Unlike other financial institutions, factoring companies evaluate the credit worthiness and risk level of the Client as well as the Payers. Billing cycles and processing of the paperwork are

essential to prevent invoices from being short paid or delayed.

Most factoring companies would make sure invoices are mailed out, email or faxed to the Payer with the proper documentation. The company continues to produce the invoices under its name, the payment address changes to the P.O. address of the Factoring company.

Payments will come directly to the funding source. Most clients appreciate the fact that they become removed from the “collection” aspect of the deals. Now they can comfortably say: “we appreciate your business, but, my “administration office” tells me that you pay in 70 days”.

Using factoring companies as buffers may be the best way of maximizing the services and gain a competitive edge.

Factoring brings; immediate cash, accounts receivable administration services and credit information all in one.

Costs may vary, some Factoring companies offer flat administration fees of 2% -5% , with Advances on the face value of the invoice of 85%-95%. Balances between the Factoring Fee and the percentage left as a reserve (remember you are only advanced 85%-95%) are disbursed once the invoice is paid to the Factor. Some companies would charge a set - up fee, as well as legal fees. It is advisable to do your homework.

IT would be smart to shop the market and decide which company fit your business needs. Services may vary, also, always making sure fees are not the driving force behind your choice.

Remember, once you have entered into

a Factoring Agreement you would have cash flow with 24 hours, this is hard to give up if you are not happy with the financing company.

In summary, if the company has an invoice that represents a product that has been delivered, or a services that has been rendered, then the invoice qualifies for factoring. Factoring is comparable to receiving payments C.O.D. Can you imagine what companies can do if they would get pay as they deliver? Not only they could deal with suppliers and receive discounts for prompt payments (remember you have the cash flow now) but they could also grow much faster than expected. The cost of factoring would be offset by the discounts available.

In 2007, a group of factoring professional and I decided to form the International Factoring Association in Canada. The main idea was to educate the business community about our industry and promote the financial empowerment of companies in the Canadian market.

Learn more about us at www. factoringassociationcanada.com .

Canadian entrepreneurs will continue to bring ingenious products and excellent services to the market. Factoring will allow them to achieve their financial goals much faster and efficiently.

Factoring is the best alternative financial solution for companies in a period of growth.

About the Author: Oscar A. Rombola is president of the International Factoring Association, Canada and Managing Director of ITC Invoice to Cash, Inc.

Information Technology Solutions

ADD Capital Corp.

MarkhaM address: 500 Cochrane Dr., Unit 2 Markham, ON L3R 8E2 Bill Patterson (bill.p@addcapital.ca) 905 940-2151, ext 235

Burlington address; 5045 South Service Road, Suite 102 Burlington, ON L7L 5Y7 Dave Ralph (dave.r@addcapital.ca) 905 631-8001, ext 400

Common Sense Leasing • New Brokers Welcome • Reasonable solution to A credit declines 20

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

ASSOCIATION REPORT Continued from page 5

2:00 - 3:30 p.m.

Collaborative Consumption Rise of the sharing society and collaborative consumption and how it will impact your business. Since its inception, Zipcar has been seen as disruptive and innovative: it used technology and marketing to change the way people own and use cars; it changed the ways cities are lived in and built; it changed prejudices about the incompatibility of environmentalism and capitalism. Innovator Robin Chase helps individuals, companies and government understand where to look for innovation and how to enable it. She explores how rethinking “excess capacity” can be combined with technology to unlock innovation, new profit centers and ultimately lead us to a sustainable planet.

Speaker: Robin Chase, Founding CEO, Zipcar and GoLoco

3:45 – 5:15 p.m.

Concurrent Workshops Financing bundled transactions and managed services in a hell-or-high water environment.

Clients desire a single source solution to their equipment finance, software and services needs for everything from motor vehicles to technology assets. The advent of “cloud” computing, using “virtual” servers and “managed services,” have only expanded the need for a solution. What are the roles of the vendor, the service provider and the funding source in providing this solution to clients?

Can effective structures be developed that can be financed and built into bundled leases and/or services payment contracts ?

Jonathan Fleisher, Cassels Brock and Blackwell LLP Douglas McKenzie, BAL Global Finance Canada Corporation Credit Analytics and Automation to Navigate Our New World The Canadian equipment finance industry will experience as many changes in the next 40 years as in the last 40. As the industry matures, it needs to innovate to remain relevant and stay ahead of other forms of commercial financing. This session addresses best practices in automated decisioning, credit scoring, and risk rating - how systems and information tools can be integrated to mimic the credit work that an analyst does every day to realize faster application

What’s New in Law? This annual session is back again and, due to its popularity, will be run twice - first, on Thursday afternoon and, then again, on Friday morning. The panelists are Francois Joubert, Jennifer Babe, Michael Burke and, for the first time, Brian MacKay. The program content is still being finalized, but the session will cover some new issues in legislation, including the potential liability of a lessor as a “supplier” under provincial occupational health and safety legislation and an update on federal anti-spam legislation that is expected to come into force in 2014. The panelists will also discuss a number of cases of note that were decided over the past year, including recent case law developments in vicarious liability in BC and Saskatchewan, co-lessee vs guarantor concerns, PPSA perfection and priority issues, and recent Quebec rulings that favour consumers. These cases often give the speakers an opportunity to provide to the attendees useful practise tips or take away points.

Jennifer Babe, Miller Thomson LLP, Toronto Michael Burke, Blake Cassels and Graydon LLP, Toronto François Joubert, Savoie Joubert, s.e.n.c., Montréal Brian MacKay, Davis LLP, Vancouver

response times and lower costs per credit application.

Janice Boulet, National Leasing Sylvie Giguère, GE Capital Canada Fal de Saint Phalle, Saint Phalle & Associates, LLC Thomas Ware, PayNet, Inc

9:00 - 9:45 p.m.

What’s new in law?

Key underlying rules that shape the business framework for asset-based financing and leasing - what’s happening?

Jennifer Babe, Miller Thomson LLP, Toronto Michael Burke, Blake Cassels and Graydon LLP, Toronto François Joubert, Savoie Joubert, s.e.n.c., Montréal Brian MacKay, Davis LLP, Vancouver

Concurrent Workshops

5:15 – 5:45 p.m.

40th Annual General Meeting of Members

6:30 - 7:30 p.m.

Chairman’s Reception Sponsored by: Blue Chip Leasing Corporation / Enable Capital Corporation

7:30 - 10:00 p.m.

Chairman’s Banquet & CFLA Member of the Year Award Sponsored by: Bennington Financial Services Corp. / Bodkin Leasing Corp. / Equirex Leasing Corp. Wine sponsored by: Pacific - Western Bank of Canada

Entertainment Peter Anthony, Comedian and “small town boy” from Pictou, Nova Scotia

DAY 2 8:00 – 9:15 a.m.

Searching for new financing opportunities: from leasing to factoring Thinking out of the box. For some, factoring may be a compelling way for members to expand their opportunities. To do so, they will need to be well-prepared for the unique challenges that will arise. What are they and how would you prepare?

David Chaiton, Torkin Manes LLP Jeff Johnston, Century Capital How changing federal regulations will impact your business If you are funded by a bank or insurance company or provide outsource services to them you need to understand the expanding federal regulations imposed on regulated financial institutions from data security, to privacy and portfolio compliance. If you sell transactions to banks or insurers, how must your deals comply with the regulations?

If you provide outsource services, what are the appropriate mechanisms for risk management, governance and obtaining

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

21

ASSOCIATION REPORT assurance crucial to ensuring success.

Moe Danis, Pacific & Western Bank of Canada

The new lease accounting rules: Understanding the essential rules The last draft of the new lease accounting standards has been released by the regulators.

What will change and when?

Loraine McIntosh, Deloitte & Touche LLP What’s new in law for leasing? (Repeat session) Key underlying rules that shape the business framework for asset-based financing and leasing - what’s happening?

The new lease accounting rules: understanding the essential rules (Repeat session) The last draft

of the new lease accounting standards has been released by the regulators. What will change and when?

11:45 a.m.

Conference close An influential voice in both politics and business Frank McKenna has a uniquely wide-ranging experience. For a decade, he was Premier of New Brunswick and a leading advocate of the Canada - US Free Trade Agreement Later, as Ambassador to the United States, he navigated contentious issues related to trade and security. As Deputy Chair of TD Bank Group, he is responsible for supporting the Bank in its customer acquisition strategy.

In conversation with Hugh Williams, Frank McKenna will give his thoughts on today

inovatec SYSTEMS CORPORATION

Technology Solutions for the Finance Industry Inovatec Systems helps finance companies identify and implement operational and efficiency improvements.

Our solutions impact the complete finance process, from credit to collections and include a number of standard modules, custom modules and integration technology.

Inovatec’s unique value proposition offers subject matter expertise combined with a state of the art technology platform.

inovatecsystems.com

22

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

and tomorrow’s challenges for Canada.

Frank McKenna, Deputy Chair, TD Bank Group Huw Williams, President, Impact Public Affairs WHO SHOULD ATTEND? Those who want to learn and discuss with their peers the latest about changes impacting the Canadian asset-based financing, equipment and vehicle leasing industry.

LOCATION Halifax Marriott Harbourfront Hotel 1919 Upper Water St Halifax, NS, Canada For full conference details please visit the CFLA website at www.cfla-acfl.ca

COMING IN SEPTEMBER

The CFLA’s OFFICIAL SHOW GUIDE which will be distributed onsite to all attendees, and mailed to our national audience of more than 6,000 senior leasing and financing executives.

The issue will also include a special PULL OUT supplement that celebrates 40 years of CFLA accomplishments and activities.

Call or email us for details

(or to contribute ideas or articles).

905-201-6600 or 1-800-668-11838 or to Editor Amy Bostock at amy@ canadianequipmentfinance.com or Publisher Steve Lloyd at steve@ canadianequipmentfinance.com

TECHNOLOGY

Sample Head

Canada is Moving to The Cloud.

Are You?

By Tara Kelly

Embrace it or try to ignore it, The Cloud is already changing cyberspace.

When it comes to moving to The Cloud, it seems there are more questions than answers: Does cloud computing affect my business? Is The Cloud safe? How are privacy and sovereignty affected? Will my data reside in Canada? Do my customer know?

Do they even care? Will my service level agreements need to change? Will this affect my errors and omissions insurance?

Do I even have time to think about The Cloud?

Truth is, you can’t afford not to. A lot is going on up there in The Cloud, and your business is in the thick of it. You don’t need to build your own cloud. You didn’t build your own computer… you used one. You don’t have to reinvent the wheel when it comes to using The Cloud. There are many highly scalable, robust and very secure cloud infrastructure solutions available today. Innovative companies are building disruptive applications to solve business problems and deliver them from an open cloud platform that you can use to your advantage. Organizations that embrace this new lean way to use technology can differentiate and excel against their competitors.

As business people, we need the Canadian government to demonstrate leadership and introduce “Cloud First” legislation now. And we need to be strong as business leaders, to stop worrying about The Cloud and learn, instead, to leverage it.

No organization...let alone country...can maintain a top-tier presence in global markets if handicapped by the inertia of legacy business models.

Recently the Canadian Advanced Technology Alliance (CATA) launched an advocacy campaign known as G-Cloud First for Canada, which will require public sector organizations to consider and fully evaluate potential Cloud solutions first – before they consider any other cyberspace data management solution. Should you?

The Privacy Commissioner argues that the Personal Information Protection and Electronic Documents Act (PIPEDA) is insufficient to meet the challenges posed by a technology that allows organizations to collect, use, and disclose an unprecedented amount of data, including personal information (“Big Data”). Big Data poses challenges both with respect to the security of Canadians’ data, and the manner in which entities use that data (especially businesses looking to use

that data to increase their earnings).

So is the collection and management of data changing? Yes. As a responsible and progressive business, do you need to stay tuned? Yes. Now, let’s tackle those underlying tough questions about The Cloud: ◉◉ Is there a reason for The Cloud in your business atmosphere?

Yes. You need the flexibility, redundancy and cost savings of The Cloud. ◉◉ Can I be confident of the safety of my data? Yes, The Cloud can be very safe! Chances are it is actually more secure than the very machines and servers that reside in your own office today. ◉◉ Will my clients’ privacy be guarded if I venture into The Cloud? Yes, Privacy issues are virtually unaffected as long as you follow appropriate protocols maintained and administered by your corporate privacy office. ◉◉ Does The Cloud respect the sovereignty of data and data collection? Well, what is Canada’s is still Canada’s! Have you ever flown with your smart phone or laptop into the United States, Europe or any other destination on the globe? Did you open email there? That doesn’t make your data theirs. If international legal disputes or concerns arise, yes another country can look at and “touch” your data. But guess what, they have the right to look at or “touch” your phone too.

When it comes to privacy, The Cloud is no more dangerous, or vulnerable, than your regular business communications. ◉◉ Will your customers even know when you decide to embrace The Cloud? Maybe not, but you should tell them. You should review your service level agreements and, yes, do check with your insurance provider. And by the way, many documents in use today are out-dated and based on antiquated businesses practices. If you haven’t reviewed your contracts lately, now.... before you make the leap...is a good time.

Canada is moving to The Cloud...and you should too!

About the Author: Tara Kelly is President & CEO of SPLICE Software, a Canadian company. She is also on the board of directors of the Canadian Cloud Council.

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

23

FUNDING REPORT

Maximizing Lessors’ Deficiency Claims

By Gordon Plottel

hen a default of an equipment lease occurs and the lessor seizes and sells its equipment, the lessor is usually left with a deficiency claim against the lessee and any guarantors.

The deficiency represents the residual amount of the lessor’s claim, after applying the net sale proceeds from the sale of the equipment. Such deficiency claims can be significant.

A common defence in deficiency claims raised by lessees and guarantors is that the lessor failed to obtain sufficient net sale

W

24

proceeds from the sale of the equipment to diminish, or eliminate, the lessor’s claim. The defendants will argue that the deficiency claim is too large, or should be eliminated entirely, due to an improvident sale of the equipment.

This improvident sale defence raises the issue of the process by which the lessor liquidated the equipment.

The lessee and guarantors will typically raise one or more of the following issues: ◉◉ the seized equipment was worth more than the liquidation price obtained ◉◉ insufficient efforts were made to market the

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

equipment ◉◉ insufficient efforts were made to negotiate a proper price for the equipment ◉◉ the equipment was not repaired or cleaned to make it more marketable ◉◉ the sale was conducted in the wrong manner, season, location or commercial marketplace ◉◉ the commission or other selling costs were too high ◉◉ the seizure, transport, storage and insurance expenses were too great The legal framework for these defences is the law of mitigation. A party has a duty to make reasonable efforts to mitigate its losses after a

default. Further, the Personal Property Security Act regimes in the Canadian provinces (outside of Quebec) refine the lessor’s duty to mitigate in these circumstances. The PPSA requires that a lessor act “in good faith and in a commercially reasonable manner”. If a court finds that a lessor failed to act in a commercially reasonable manner in the realization process, the court can reduce, and even eliminate, the lessor’s deficiency claim, and also award damages to the lessee. Therefore, a lessor’s realization practices are critically important.

Many cases have considered allegations of improvident sales of equipment in this legal context. In general, the court does not require that the lessor obtain the highest possible value for the equipment sold. Instead, the focus is on the effort and process of sale. The court will consider whether a lessor acted in a commercially reasonable manner in exercising its remedy of sale, taking into account the relevant circumstances.

The courts also consider the evidentiary issue of which party bears the onus of proving, or disproving, the allegations of improvident sales. The courts have been generally consistent in requiring the lessee or guarantor who alleges an improvident sale to prove such allegation. As set out in a recent British Columbia Supreme Court case, “A debtor alleging failure of a secured party to deal with collateral in a commercially reasonable manner bears the burden of proving not only that the manner of

FUNDING REPORT selling the collateral was improvident, but also that the failure to act in a commercially reasonable manner resulted in recovery of less money (and therefore, an increased deficiency) than would otherwise have been the case.�

Nonetheless, it is important for the lessor to maintain prudent realization practices, to help defend against such allegations of improvident sales. Some of the steps that lessors should take are as follows: ◉◉ Obtain an appraisal of the equipment’s value, after it is seized. This is especially important for specialized equipment. The appraisal should be independent and

in writing. ◉◉ Document the marketing efforts. Keep records of the placement, frequency and content of all marketing efforts. ◉◉ Record and document the state of the equipment upon seizure, and consider making repairs if there is a reasonable prospect that such repairs will increase the resale value. ◉◉ Maintain reasonable costs for seizure, transport, storage, insurance, commission and other realization costs. ◉◉ Consider the mode of selling in each case.

Not all equipment is best sold by auction.

Consider targeting certain prospective purchasers

or industry groups. If an auction process is used, consider imposing reserve prices. ◉◉ Negotiate and record the negotiations with purchasers at private sales. ◉◉ Consider the timing of the sale, and ensure that it is justified if the equipment has a seasonal resale market. However, unwarranted delays in liquidation can result in unrecoverable storage and insurance costs, and possibly lower liquidation values. ◉◉ Consider whether to sell the equipment as a package or in individual pieces, seeking advice from industry experts if necessary.

◉◉ Keep records and document each step of the realization process.

The goal for a lessor is to develop prudent and efficient realization practices – and preserve evidence of those practices – that can withstand an allegation of improvident realization from a lessee or guarantor. The test will be whether the lessor acted in a commercially reasonable manner. If the lessor’s realization process was commercially reasonable, it should prevail against an improvident realization defence and maximize its deficiency claims.

About the Author: Gordon Plottel is a partner in the Vancouver office of Miller Thomson LLP. His practice focuses on commercial security enforcement and realization matters.

ÇŤ Ç€ÄžĆŒÇ‡ Ä?ĆľĆ?Ĺ?ŜĞĆ?Ć? ĚĂLJ͕ Ä‚ ƚŚŽƾĆ?ĂŜĚ ĚĞÄ?Ĺ?Ć?Ĺ?ŽŜĆ?͘

KŜĞ ĞĂĆ?LJ ĚĞÄ?Ĺ?Ć?Ĺ?ŽŜÍ?

'Ğƚ ƚŚĞ ĞƋƾĹ?ƉžĞŜƚ LJŽƾ ŜĞĞĚ͕ ĂŜĚ Ć?ƚĂLJ Ä?Ä‚Ć?Ĺš ĆŒĹ?Ä?ĹšÍ˜

Í„ Ǥ Ç Ç Ç Í˜ Ɖ Ä? Ä? ĹŻ Äž Ä‚ Ć? Äž ͘ Ä? Ĺ˝ Ĺľ

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

25

TECHNOLOGY

Measuring success for equipment leasing software – and how to get there

By Joelle Ascher

T

he success of your any leasing software implementation can mean different things depending who you ask.

However, there is really only one metric that really

counts.

By definition, a successful implementation is the realization and attainment of the intended benefits to your organization that were initially desired. This also implies that if you are reaping the benefits then the software is also meeting your needs and vice-versa.

So the question that comes to mind is what are those benefits that a company looks for and in particular what is upper management really after? The obvious items that would be on 26

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

your checklist would be streamlining operations, data entry error reduction, data accessibility and visibility for all users and automation of repetitive tasks, all without taking away from the subjective and creative forces that still must command your overall company direction. The truth is that you achieve those checklist items indirectly by focusing on your business requirements.

The saying that “detail is king” is never truer than with enterprise software which will touch every level of your company from the personnel that enter the data all the way to the top tier. It will affect your operations, accounting, customer service, collections and strategic decision making.

Ignoring the very items that make your finance business what it is, it’s uniqueness and qualities that make it stand apart its competitors, the procedures and policies behind it is a recipe for disaster. The ultimate success factor will never be achieved without a laser beam focus on your company’s leasing business requirements.

Depending on who is involved in the decision making, ther factors will interject themselves based on past experiences, preconceptions and unrealistic expectations. How many times have I seen companies deciding at a moment’s notice (ok slightly exaggerated but seems like it is) that they must complete an implementation within an X timeframe because of Y and Z that will occur in a month or two. Or businesses selecting a software based solely on technology because they want the latest and greatest with buzz words like n-tier and cloud computing ? Leasing software for your business is not a status symbol or a business card or even a marketing brochure. It is probably the smartest investment you will make yielding the highest return but only if done right. So how do you get there?

Let’s review the initial selection and evaluation process since that is the first crucial step. There are three criteria that companies generally focus on during the selection phase, each of which will impact the ultimate success (or failure) of a leasing software implementation.

Criteria 1: Price Price is of course a significant driving force during the evaluation phase, but often it is based on erroneous or unrealistic assumptions. Companies tend to base the price on what they believe they should pay for a solution rather than what is realistic. A price range should be established based on what is available in the market place taking into consideration

TECHNOLOGY your company size and revenues. Price should also be evaluated against the overall value of a solution offering which should include not only the software product itself but all of the ancillary services that come with it. When determining price, look carefully at what it includes: a knowledgeable vendor and one that has the expertise and is willing to manage and oversee the implementation. Look for a vendor that pays attention to details and conducts a needs analysis study to understand the full scope of your business and that meets its requirements.

Ensure that price buffers have been built in to account for unforeseen business changes that may require add-ons or revisions. Look for software that is flexible and can adapt to ongoing business evolution and can keep your company compliant with governing laws, rules and regulations.

Criteria 2: Time Many companies start the selection process with a fixed idea of how much time should be allotted from purchase the software and are live. Often, this self-imposed time line is not in consideration of the true effort and resources that will be required generally because the company has no previous experience with which to base this on. Companies that have already gone through enterprise software implementations tend to have a much better assessment of the time and effort required and adjust their expectations accordingly.

Implementing leasing software for your finance business will impact all departments and levels of personnel from administrative people to upper management. Your effort and commitment is crucial to the implementation success.

Allow time for data scrubbing and review, testing, reentry (manual or automated) of historical and current data as well as reconciliation. Since implementations occur over and above the normal day-to-day operations, being realistic about allowing sufficient time and resources is very often grossly under-estimated.

Criteria 3: Needs How well the software meets your business needs should be the number one priority. Period. Full Stop. Completing an implementation on time and within budget will mean nothing

Detail is king when you’re looking at enterprise software that affects your entire operation if at its conclusion the software does not fulfill the business requirements. Furthermore, needs should be clearly defined well before the project implementation even begins. Ensure that you do your own in-house analysis of your business needs focusing on how you want to run your business, where improvements are needed, what makes you unique and gives you the competitive edge.

Examine areas needing change, existing problems and weaknesses and determine what areas need improvement.

Lastly project ahead five years to identify where you believe the business is headed and what new products or programs may be introduced. Once you have done your own business analysis “homework” and compiled a list of must-have items and niceto-have items,, work with a software partner that can help you translate these needs into a workable leasing software solution.

In conclusion, when you are in the process of evaluating a new or upgrade of leasing software for your finance business, your number one focus should be needs, needs, and more needs.

Fulfilling both the operational and strategic needs at all levels of the organization will not only bring the benefits desired, if approached realistically and pragmatically, will often even exceed your initial expectations.

Price and time constraints are secondary in that if you didn’t get the benefits and/or solve the problems that were there at the onset, then those resources invested have been lost. Even worse, confidence and morale become broken for any next attempt.

In the end, reaping the benefits, advantages and gains that leasing software must deliver to your organization is the only true measure of software success.

About the Author: Joelle Ascher is founder and president of Ryzn Enterprise Systems Inc, a provider of customized software solutions to the financial services industry since 1989. With over 25 years experience as a software consultant, he has successfully implemented small to large software solutions for customers in diverse industries including manufacturing, distribution and finance, each with some degree of customization and tailoring.

Credit Risk Hurting Cash Flow?

Make fast, accurate credit decisions with a powerful web-based credit solution. Use our bank reports to compliment historical in-file data with current banking information.

Visit www.dnb.ca to request trial reports.

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

27

vendor directory Providing practical and cost-effective legal services to the Equipment Finance Industry for 20+ years 905.940.8700 • 1.866.508.8700 • wvllp.ca

National Appraisal Services FAST. ACCURATE. COST EFFECTIVE.

877.463.8241 www.verusvaluations.com

Since 1983, Northstar Leasing Corporation has been meeting the needs of our business clients and Broker network across Canada.

Northstar takes pride in offering fast approvals, competitive rates, and flexible terms, coupled with friendly, personal service.

Please contact Bruce Collingwood or Wayne Gray at 705-737-5595 or toll free 1-888-678-2701. www.nstarleasing.com

ÂĄÂŒÂ’Â“Â? ŽŠ£“š‘ ÂœÂĄÂ?ÂœÂĄÂŠÂ¤Â“ÂœÂš

ÂŞÂŞÂŞá€”ÂœÂĄÂŒÂ’Â“Â?Â—ÂŽÂŠÂŁÂ“ÂšÂ‘á€”ÂŒÂœÂ˜ á šá€–á‚€á ˝á ˝á€–á żá šá şá€–á ťá‚€á şá‚€

At the core of your business

• Equipment, Vehicle, Any Asset Leasing • Business First™ Solutions • Simple or Complicated Let’s talk about your leasing software needs.

888-747-RYZN (7996) | info@ryzn.com | www.ryzn.com

inovatec SYSTEMS CORPORATION

Technology Solutions for the Finance Industry

Get your ad on this page for as little as $185 per issue for all of 2013

Vendor Directory Advertising call Brent White at 905-201-6600 x 222 or email brent@canadianequipmentfinance.com

28

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

events

WHERE TO GO. WHAT TO SEE. Find out more about the conferences, exhibitions, seminars and meetings in your industry

September 9-11 Equipment Leasing and Finance Association Lease and Accountants Finance Conference Austin , TX www.elfaonline.org

September 9-10 Equipment Leasing and Finance Association Operations and Technology Conference Austin, TX www.elfaonline.org

September 12-14 National Equipment Finance Association Funding Symposium Nashville , TN www.nefassociation.org

September 15-17 IFO Canada 3rd Annual Canadian Financial Operations Symposium Toronto, ON www.financialops.org/canada2013

September 17-18 Strategy Institute Transportation Infrastructure Funding & Financing Conference Toronto, ON www.transportationfinancing.ca

September 24-26

September 18-20 Canadian Finance & Leasing Association Conference 2013 Halifax, NS www.cfla-acfl.ca

October 10-11 Associated Equipment Dealers CFO Conference: Financial Issues for Distribution Executives Oak Brook, IL www.aednet.org

October 6-9

www.smartcardalliance.org

November (TBA) TMAC Toronto Chapter 7th Annual Networking Event Toronto, ON www.tmac-Toronto.ca

November 5-7 BAI BAI Retail Delivery Conference 2013 Denver, CO www.BAI.org

November 6-8

RIMS Canada Horizons--Annual Conference Victoria, BC www.rimscanadaconference.ca

October 20-22 American Bankers Association ABA Annual Convention, Business Expo & Directors’ Forum 2013 New Orleans, LA www.aba.com

October 20-22 Equipment Leasing & Finance Asssociation 52nd Annual Convention Orlando, Fl www.elfaonline.org

October 20-23 Sourcemedia ATM, Debit & Prepaid Forum 2013 Las Vegas, NV www.sourcemedia.com

October 23-24 Airline Information Inc 6th Airline and Travel Payments Summit & Co-Brand Conference 2012 London, UK www.aiglobal.org

Celero Solutions Canadian Financial Technology Conference Regina, SK www.celero.ca

October TBA

September 25

November TBA

2nd Women in Payments Symposium & Payments Business Magazine Awards Night, Toronto, ON www.womeninpayments.ca

Smart Cards in Government Conference 2013 Smart Card Alliance Washington, DC

Association for Governmental Leasing & Finance 2013 Annual Conference Boca Raton , FL www.aglf.org

November 13-17 Commercial Finance Association 69th Annual Convention Los Angeles , CA www.cfa.com

November 19-21 Comexposium CARTES & Identification Exhibition 2013 Paris, FR www.cartes.com

November 12-14, 2014 Commercial Finance Association 70th Annual Convention Washington, DC www.cfa.com

Everlink Client Conference CONNECTIONS 2013 Toronto, ON www.everlink.ca

canadianequipmentfinance.com | CANADIAN EQUIPMENT FINANCE | july/august 2013

29

Observations

Often, what is right and true is a delicate valuation

By Rob Birnie

hen meeting with clients, I am often asked “What is Verus, and how can an appraisal help us?”

When substantiating the value of equipment at the time of purchase, factors affecting value are often clearly identified.

The equipment is typically fully operational (or problems are well documented and understood), there is a seller who is motivated to realize maximum proceeds and there is a buyer who is prepared to purchase the equipment. In most cases, there are numerous examples of similar equipment available in the market by which one can draw comparisons of value. In short, most of the factors which influence value are well understood and are agreed upon by all parties to the deal.

But, what about those times when everyone isn’t in agreement? In the case where a deal has “gone bad”, there are a number of conflicting factors which must be thoroughly considered in order to accurately establish the value of the asset. In recent years, we have encountered many instances where our appraisal process has more closely

W

30

resembled a Scotland Yard investigation than an appraisal assignment. Some examples include: A number of years ago, we assisted with market valuation of a seized pleasure boat.

The unit had been described to lenders as having been partially submerged and therefore “worthless”. We understood that a lowball offer had been presented by a 3rd party to purchase the vessel. A detailed inspection of the vessel, including examination of upholstery and interior hull spaces for water marking and an inspection of wiring for corrosion identified no signs of submersion. Discussions with businesses and tenants in the local marina who had observed the boat for a period of time resulted in no recollection of a submersion.

All indications were that the vessel was undamaged. Detailed market research allowed our office to identify a market value significantly higher than the offer on the table. We can only assume that the 3rd party was attempting to capitalize on an opportunity resulting from misinformation (and may have been in discussions with the debtor).

CANADIAN EQUIPMENT FINANCE | july/august 2013 | canadianequipmentfinance.com

Last year, we were engaged to place a distress sale value on closed cell foam fabrication equipment.

The lender received an offer which appeared to be extremely low in comparison to expected market value of the components.

After examining market demand for the specialized equipment, we contacted the equipment manufacturer in order to quantify the costs of disassembling of the machinery. At that time, we found that if the machinery was not regularly operated, there was a high probability of residual isocyanate resins being exposed to air and curing – a condition which would likely destroy all resale value of the equipment. Identification of these factors allowed the lender to make an informed decision when liquidating the equipment.

We recently assisted a lender with the appraisal of a portable rock crushing spread which was described as non-functional, with some parts having been replaced and other parts missing.

A physical inspection of the unit and a detailed comparison of component serial numbers with build sheets from the manufacturer indicated that no components had been changed or were missing and that the value was substantially higher than was expected. In this case, the debtor appeared to have been motivated to undervalue the asset in order to “work a deal”.

The common thread of these examples is that, as appraisers, it is critical that we objectively consider all of the information available in order to substantiate the true value of the asset. Which brings me back to “What is Verus?” Verus is Latin with many meanings – the most common being true, real, proper, right.

About the Author: Rob Birnie is a Certified Machinery and Equipment Appraiser (CMEA), Master Marine Surveyor (MMS), Senior Business Analyst (SBA) and an active member of the Vancouver Board of Trade. Rob has applied his hands-on experience in mechanical and marine repairs and more than 19 years of insurance damage appraisal, valuation and loss settlement experience to create and direct Verus Valuations.

GE Capital Commercial Distribution Finance

LIKE A BANK: WE CAN LOAN YOU MONEY. UNLIKE A BANK: WE KNOW THAT MONEY ALONE DOESN’T DRIVE RESULTS. At GE Capital, we’re not just bankers, we’re builders.

We understand that building a better business takes more than just working capital. It requires human capital – intellectual capital. Whether it’s wholesale inventory financing or access to GE’s vast, real-world expertise, our professionals will make sure you have the right capital for the right job. Our proven approach to lending and advanced online reporting tools are helping businesses make faster, more informed decisions.

Isn’t it time you stop just banking and start building?

Call our team today at 888-609-5550.

www.gecdf.ca/cef

facebook.com/GECDF @GEInventoryFin © 2013 General Electric Capital Corporation. All rights reserved.

13CDN115

Secure the right equipment financing before it’s time to buy.

Getting the right equipment at the right time and the right price is critical to driving your business forward. But, if you can’t get the financing you need fast enough, your business may be impacted.

What if … n

You could have reliable access to financing when you needed it?

n

You could get the interest rate you deserve?

n

You didn’t have to go through an application process every time you wanted to make an equipment purchase?

Now you can with the RBC Equipment PurchaseLine™ You’ll know with certainty how much credit you have access to for the whole year, and you’ll get the flexibility of both lease and term borrowing options. Even better, you can set it up ahead of time.

It’s ideal for businesses that make recurring equipment purchases over $250,000 a year.

Open your RBC Equipment PurchaseLine today RBC Royal Bank® has a team of equipment financing specialists that can provide you advice specific to your business’s unique needs. To talk with an RBC® equipment financing specialist, please call 1-855-561-6723 or visit us at www.rbc.royalbank/flexiblefinancing.

™ ® / TM Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. VPS82825