Canadian Equipment Finance Magazine JanFeb 2014 by Lloydmedia Inc

Jan/Feb 2014 • volume 2 • issue 1 | www.canadianequipmentfinance.com

Backstage Pass to Equipment Auction Financing

Selling Big With Ritchie Bros. Auctioneers 2014 Insight & Forecast Telematics reveals new financing trends Favourable conditions drive capital spending Long view outlook for lending Human capital problems? You’re not alone PM40050803

GE Capital Commercial Distribution Finance

WINDOWS OF OPPORTUNITY 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 innovative approach to lending and advanced customer solutions 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

13CDN276

contents January/February 2014 Volume 2 Number 1 Publisher and Editor-in-Chief Steve Lloyd steve@canadianequipmentfinance.com Creative Direction / Production Jennifer O’Neill jennifer@canadianequipmentfinance.com Photographer Gary Tannyan Advertising Sales Mark Henry mark@canadianequipmentfinance.com Brent White brent@canadianequipmentfinance.com Chantal Goudreau chantal@canadianequipmentfinance.com For subscription, circulation and change of address information, contact subscriptions@canadianequipmentfinance.com

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

Technology: Telematics is a leading-edge technology that has been around since the early 1990s, but its application is rapidly expanding throughout the world. Canadian fleet and heavy equipment companies have been adopting telematics in growing numbers to lower costs, protect their investments, and add levels of security. This trend will accelerate in 2014. »4

FORECAST: Canadian manufacturers could do themselves and their country a big favour in 2014: use some of their bulging balance sheets to buy more machinery, software and other items to make their offices and factories more efficient. »7

FEATURES

Credit Outlook for 2014 and Beyond: FEI Canada Survey

Infrastructure spending surges Outlook for Canadian economy improves as world trade and US growth recover. »10

Emerging Markets: Crisis or Just a Drama? 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

Just last month when we released the Global Asset and Auto Finance Survey for the fourth quarter of 2013 the outlook for the global markets was becomingly increasingly positive. »11

Improvements are expected, funds are becoming more available. »21

Prepare Now For Migration to your Next-Generation Credit Organization Solution »22 Human Capital in 2014 The Challenge of Finding and Keeping the Right People. »24

Subscriptions available for $40.00 year or $60.00 two years. 2014 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.

Stakes are high in 2014 for IT equipment suppliers »27

Also Publishers of

Payments Business www.paymentsbusiness.ca

Canadian Treasurer www.canadiantreasurer.com

Contact Management www.contactmanagement.ca

Direct Marketing www.dmn.ca

Financial operations www.financialoperations.ca

Backstage Pass to Equipment Auction Financing Selling Big with Ritchie Bros. Auctioneers. »12

Economic improvement, favourable financing conditions will drive capital spending Top 10 Equipment Acquisition Trends for 2014. »15

The Long View Outlook for Lending in Our Industry »18 Looking Ahead: How They See It »19

NEWS Joint initiative looks to provide new industry performance data. »8

YOUR BUSINESS »26 EVENTS: Find out where to go and what to see in 2013. »29

Observations: An Appraiser’s Tale. What happens when “that third mound of snow on your left is probably the machine you’re looking for.” »30

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Technology

Telematics for Self-Pay Parking Illustrates Growing Financing Trends By Bern Grush

elematics is a leading-edge technology that has been around since the early 1990s, but its application is rapidly expanding throughout the world. Canadian fleet and heavy equipment companies have been adopting telematics in growing numbers to lower costs, protect their investments, and add levels of security. This trend will accelerate in 2014. Take a quick look at the consumer sector, where the technology is in fast-growth mode. Insurance industry analysts suggest that over the next three years between 10 and 30 percent of all Canadian auto insurance policies will transition to being telematics based. Consumers plug a device into their vehicle, providing them with opportunities to receive value added benefits during their driving experience, such as car health diagnostics, access to discounts and possible reductions on their auto insurance premiums. Fleet management carries a fairly well understood return on investment but that also means financing this technology and its ongoing support and upgrades needs to be equally well understood. Of the four key applications of tracking of vehicle fleets and container inventories, optimization, and security are probably best known, in addition to the original commercial, large scale applications. Today’s application areas comprise Sat-Nav, usage-based insurance (UBI), and intelligent transportation systems (ITS). Consumer navigation devices have become commoditized and neardisposable in nature. Usage-based insurance remains a challenge, hard to justify as a telematics application and for this reason some companies, such

as Progressive Insurance, only leave their telematics device in the vehicle for a short period. ITS applications are generally built into a vehicle. So of none of these latter three are strong candidates for financing.

Self-Pay Parking Following from a dramatic upswing in these traditional uses of telematics, the combination of driver familiarity, and location technology advances is now giving rise to the use of telematics for additional applications which might generate new funding opportunities. One these—the self-pay parking meter—addresses the growing pressure on cities to deal with parking congestion and the concomitant nuisance drivers increasingly face to make many small parking payments throughout the day or week. This is especially troublesome for commercial fleets that endure an endless parade of parking citations in larger city centers. This self-pay service works by using a telematics device to detect parking in a paid spot, calculate the correct fee, and charge a pre-arranged account. What sets this apart from more traditional uses of vehicular telematics is that the application is essentially a financial application. The devices are calculating a fee then triggering a charge over a cloudbased service. This class of application is a bit like a small-format fleet application (but with a much larger fleet) and a bit like a consumer application such as UBI, but must stay in the vehicle. As cars become packed with an everexpanding array of electronic systems for connected vehicle, autonomous vehicles, real-time navigation, realtime diagnostics, we can expect a healthy after-market for many of these capabilities. In some cases, that after-

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

market is limited by the expense of these devices, but suppliers can find ways to provide subscription services on devices that are provided as the basis for the service contract—in the same way that smart phones are provided under a multiyear service contract. New services such as our PayBySky self-pay parking service are a change for both operators and end users. ATI has a tiered customer base. The first level is parking operators, be they municipal or private, who want to provide a convenient way for their end-users to pay for parking and in doing so, can also create loyalty programs that incent these users to use their parking facilities. In this tier, companies in the equipment finance sector may recognize and capitalize on capital and funding needs in private sector operations, and in municipal and other government-based retrofit or new installation construction. (The second tier comprises the end users—the parkers who ultimately pay for this kind of service.) Each end-user will have signed a minimum fixed term service contract, which includes service fees and capital and associated financing costs of the physical unit. Average financing size is between $1M and $10M on a rolling 24-month term. We’re convinced of the merits of longterm growth in the telematics market and continue to explore new applications which expand the installation bases and the uses of vehicle-based systems. We work with finance companies that provide single source bulk financing for hundreds of thousands of devices delivered to end-users that will use the PayBySky service. About the Author: Bern Grush is VP Innovation, Applied Telemetrics Inc. Unique among road pricing thought leaders, Bern Grush is both pro-car and pro-road pricing. He has been influencing the technology and thinking about road and parking pricing in Europe, Asia and North America since 2004.

Secure your equipment financing before it’s time to buy. If your business makes ongoing equipment purchases, getting the right equipment at the right time and the right price is critical. So imagine: ■

Accessing financing whenever you need it.

■

Getting the interest rate you deserve.

■

Avoiding an application process with every purchase.

Now you can with the RBC Equipment PurchaseLine® You’ll know how much credit you can access for the whole year with lease and term borrowing options. Even better, you can set it up ahead of time so it will always be there when you need it.

Open your RBC Equipment PurchaseLine today Simply call 1-855-561-6723 or visit us at www.rbc.com/accessequipment

™

® / TM Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. Subject to approval and certain conditions apply. VPS85130

Want to know more about your card programs? Do you issue fleet cards? Manage transactions? Is it vital to keep on top of technology which affects your mobile solutions?

Sign up NOW for a free subscription to Payments Business magazine. Visit our website at www.paymentsbusiness.ca and learn more about the magazine Payments Business is a Lloydmedia, Inc publication. Lloydmedia also publishes Financial Operations magazine, Canadian Treasurer magazine, Canadian Equipment Finance magazine, Direct Marketing magazine and Contact Management magazine.

Forecast

Investment spending to stimulate growth and efficiency holds the key to a robust year in Canadian business anadian manufacturers could do themselves and their country a big favour in 2014: use some of their bulging balance sheets to buy more machinery, software and other items to make their offices and factories more efficient. Investment spending could be the driving force behind Canada’s economy in 2014. HSBC forecasts that total output, measured by gross domestic product, will expand by 2.1 per cent (adjusted for inflation), up from a projected 1.6 per cent advance this year. Growth in fixed investment is slated to spurt from 0.6 per cent to 3.1 per cent. By contrast, consumer spending is expected to slow, contributing little more than one percentage point to next year’s growth, down from over two points this year. “When I look at Canadian businesses, everything is there for them to start investing in machinery and equipment,” Mr. Watt says. “Balance sheets are in exceptional shape. While consumers are borrowing at a slowing pace, businesses are borrowing at an accelerating rate.”

Investing in economic hotspots The brightest spots, according to HSBC, will again be in Western Canada. Sawmills and other building material suppliers are already benefiting from the uptick in the U.S. housing market. The energy sector will remain relatively buoyant, and continued expansion in Asia should provide a boost for a widening circle of Canadian manufacturers. In Asia, he singles out agri-food, transport equipment and urban infrastructure (such as water and sewage systems) as promising long-term

prospects for competitive Canadian exporters. The strongest pointers to Canada’s prospects in 2014 will come from U.S. economic data and global commodity prices. Mr. Watt says Canadian companies looking for early clues should keep an especially close eye on surveys of purchasing manager intentions around the world. HSBC compiles several such indices. These purchasing-manager surveys “tend to have about a three-month lagging relationship with global trade, and trade then ties into the global economic outlook,” he says. “I like to use that as a key indicator on whether I should be turning more optimistic about the global economy, or whether I should be turning more cautious.”

order to be competitive with Germany, with Europe and with emerging Asia, we need to start making these investment decisions now. Rather than being cautious because of temporary factors, we have to realize what’s coming and where do we want to be five or 10 years from now.” Exporters should not count on a further dip in the Canadian dollar to open up new markets or bolster profits from existing ones. HSBC sees only a modest weakening in the loonie over the next year or so, not enough to make a big difference to competitiveness. In fact, Mr. Watt observes, “a weaker Canadian dollar could actually make it more difficult to spur Canadian businesses to invest in machinery and equipment, because so much of that is imported. “What we actually need is Canadian

“When I look at Canadian businesses, everything is there for them to start investing in machinery and equipment” How Canada can compete Canadian businesses may be well-advised however, to think twice before delaying or scaling back their investment plans. Labour costs remain higher in Canada than in the U.S. and much of Europe, putting Canadian companies at a disadvantage to most of their foreign rivals. Citing the recently unveiled CanadaEU trade deal, Mr. Watt notes that, “in

businesses to have stimulative financial conditions, which they’ve got, and low interest rates with a relatively strong dollar, which would prompt them to make use of the fact that imports of machinery and equipment are still cheap.” But Mr. Watt’s advice comes with a warning: “You cannot wait for exports to recover and then start making investments to become more productive.”

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

News

Joint initiative looks to provide new industry performance data To help the Canadian Finance & Leasing Association (CFLA) members benchmark their business and to provide industry leadership, PayNet Canada, the premier provider of risk management tools and market insight to the commercial credit industry is taking on a joint initiative with the CFLA to provide Canadian equipment finance companies with customized industry performance information. The Canadian Business Lending Index illustrates trends in commercial business lending and serves as a leading economic indicator because private businesses generally respond to changes in economic conditions more rapidly than larger public companies do, This data will help members understand their own current business volume relative to industry-wide total lending. The CFLA Business Credit Delinquency Trends on 30 and 90 day loan delinquencies for Canadian

businesses will also assist member firms in understanding delinquency trends and how they compare to current industrywide performance. These joint information initiatives are now available quarterly through the CFLA; members can access this economic insight on measures of new business lending and loan delinquencies at the CFLA website www.cfla-acfl.ca. “Taken together the CFLA Business Credit Delinquency Trends and the Canadian Business Lending Index will enable the CFLA to better report on our industry and build our source for industry information. Collecting and distributing industry size and benchmarking data is a primary role for the Association,” states David Powell, President & Chief Executive Officer of the Canadian Finance & Leasing Association. “CFLA is constantly asked by members, large and small, for industry statistics to help members assess their

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

market share and business performance, and this partnership will become a unique asset for our membership.” Traditionally, commercial finance lenders have relied on limited information to help facilitate the credit granting process, which has been cited as an impediment, holding back growth of commercial lending to privately-held Canadian businesses. “PayNet maintains the richest and largest collection of small business loans and leases proven to streamline credit investigation, accelerate credit decisioning time and increase loan approvals,” states Anthony Zambon, Director, PayNet Canada. “Equipment finance is an important source of capital for small and medium sized businesses in Canada, and we are pleased to partner with the CFLA; this information will prove our ongoing commitment to help commercial lenders lower costs and grow revenues,” notes Zambon.

KEEP UP TO DATE AND INFORMED BY VISITING OUR WEBSITE DAILY. Canadian Equipment Finance magazine posts news, insights, updates and breaking stories as they happen. Stay Informed. Keep Ahead.

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.

Forecast

Infrastructure spending surges Outlook for Canadian economy improves as world trade and US growth recover nfrastructure trade is set to triple by 2030, according to HSBC’s latest Trade Forecast, and see a significant rise in its share of global trade. The Forecast outlines how as countries look to increase their manufacturing capacity and civil infrastructure, demand for overseas goods and equipment will surge. In a special focus on infrastructure, the report finds that between 2013 and 2030 infrastructure-related trade will grow at an average of 9% annually, and see a rise in its share of overall merchandise trade, from 45% of total goods exports in 2013 to 54% by 2030. In Canada, the share of infrastructurerelated goods – such as transport equipment, industrial machinery and non-ferrous metals – is expected to increase from 22% to 32% by 2030. International businesses around the world report the same level of confidence in global trade prospects as last year with the HSBC Trade Confidence Index holding steady at 112 points. The Forecast meanwhile predicts that world trade will grow at a modest pace to 2015 before then accelerating between 2016 and 2020. Canada’s current Trade Confidence Index is tracking at the same pace as the global average, at 111.

Shifting Infrastructure Demand The report differentiates between goods for infrastructure - the materials needed for infrastructure projects, and investment equipment - the machinery required by businesses to boost production.1 The USA is currently the biggest importer of infrastructurerelated goods across these sub-sectors, but the report predicts that by 2020 India will become the lead importer of goods for infrastructure as it invests in building its domestic networks. China 10

is set to become the top importer of investment equipment by 2020 as it boosts manufacturing capacity. Other rapidly-growing Asian economies will take an increasing share of infrastructure-related imports over time, with Malaysia, Korea and Vietnam moving up the rankings. Excluding the USA, Mexico is the highest ranking nonAsian importer of total infrastructure goods, ahead of Brazil. Overall the report indicates that trade in investment equipment will increase more rapidly than trade in goods for infrastructure in the years to 2030, in part due to the pivot in China’s economic focus towards consumer-led growth and next generation technology. “The investment that many countries are making in infrastructure is significant, and this provides a huge opportunity for businesses looking to grow and develop,” said Ben Arber, head of Global Trade and Receivables Finance, HSBC Bank Canada. “Canada is well positioned both in terms of the abundance of natural resources and companies with extraction, engineering and project management expertise. There continues to be will be strong demand for infrastructure-related goods and natural resources from the USA, and continually growing demand for the same from China and other emerging markets.”

Maximising the Infrastructure Opportunity China is forecast to increase its dominance of global exports for infrastructure, increasing its share of total global exports of these goods (among the 25 countries in this Forecast) to 34% of goods for infrastructure and 39% of investment equipment by 2030. Canada’s strong export growth will

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

allow it to move from 10th to 9th in the ranking of countries by ‘intermediate goods for infrastructure’ trade over the long term, while also moving from 12th to 10th in the ranking of countries for ‘investment equipment’ trade, also over the long term.

Overall Infrastructure Investment According to the report, even as economies develop and become wealthier, their demand for infrastructure products remains strong. It outlines how advanced economies like the USA, the UK and Germany will need to continue investing in infrastructure to maintain their competitive advantage in supplying investment goods to the rest of the world. Ben Arber commented: “We expect infrastructure-related goods to increase their share of rising global trade, providing strong opportunities across both developed and emerging economies for exporters and importers of those goods and the merchandise that can be manufactured as a result. This is all good news for Canadian international companies, who could now also benefit from $1 billion set aside by HSBC Bank Canada earlier this year to help fund new international growth projects.” Asia is forecast to see the most rapid growth in merchandise trade in the decade to 2030 led by India, China and Vietnam at an average of more than 10% a year. Yet advanced European economies - such as the UK, France and Germany - are also forecast to expand their exports of goods at rates of 4-5% a year on average over this period, while average growth in US goods exports will be closer to 6%. About the Author: This report was prepared with the assistance of the HSBC Bank Canada group and is based on their research.

Forecast

Emerging Markets: Crisis or Just a Drama? By Dara Clarke

ust last month when we released the Global Asset and Auto Finance Survey for the fourth quarter of 2013 the outlook for the global markets was becomingly increasingly positive – with emerging markets continuing to perform, and markets like the US and UK showing strong signs of recovery. Recent news from the emerging markets have however undoubtedly taken some of the gloss off expectations, and this news could be bad for the asset and auto finance industry, which counts these countries as among the best providers of opportunity for the near future. The ‘Fragile Five’ – India, Indonesia, Brazil, Turkey and South Africa – and other emerging economies like Russia, Argentina, Chile and Colombia, have all posted declines, with Emerging Market (EM) equity indices recording a 6.4% loss in January 2014, according to Dow Jones. Their currencies have taken a battering in recent months as capital has taken flight following the US Federal Reserve’s announced intention to taper the Fed’s quantitative easing program, however modestly and slowly, and in the future. The Turkish lira plunged to a record low against the dollar, triggering emergency defensive action from the central bank to raise interest rates; similar action was taken in India and

South Africa. Any damage limitation here is expected to be short-lived. These economies have witnessed spectacular capital inflows chasing yield since the global financial crisis, and therefore could suffer considerable economic pain should the situation reverse. And that becomes increasingly likely against a backdrop of gradually rising global interest rates in the developed economies, particularly as the US economy strengthens and growth in China slows. The current account deficits of the ‘Fragile Five’ have left them particularly vulnerable to capital outflows. With diminishing returns from often politically and economically unstable markets, it’s no shock that capital is flowing back to safer havens that are showing encouraging signs of growth. But while there are doomsters predicting an emerging markets crisis sooner rather than later, like that of 1997–98 when investors fled all EM asset classes, there are plenty who see the current situation as no more than a temporary drama. The International Monetary Fund, for example, argues that the emerging markets are far less economically vulnerable than they were in 1997, with flexible exchange rates and higher reserves - and that they can adjust to a world in which rates gradually climb. Famed economist Nouriel Roubini believes that the threat of a full-fledged currency, sovereign debt and banking

crisis remains low for these countries – this from the man known as ‘Dr Doom’. And Mark Mobius, chairman of the massive Templeton Emerging Markets fund, believes that the effect of the US tapering is “not significant” to emerging markets as an asset class. Emerging markets globally face some falling growth, rising debt, and political uncertainty, and are surely in for a bumpy ride in the near term. But as they continue to develop overall in the slightly longer term, the opportunities for asset finance remain firm. For the present at least, White Clarke are seeing little evidence of these fluctuations affecting volumes in many of the markets in which they are operating, and instead are seeing clients in some countries (China, for example) posting record volumes of business – great news, as they celebrate their New Year. We will, of course, be updating our Global Survey on a quarterly basis (the next one will be March/April). For the moment however, the latest issue remains an up-to-date summary of the industry outlook – and well worth downloading free of charge and having a read. About the Author: Dara has many years’ experience within the captive finance, banking industry and the asset finance sector. This included senior positions as Finance Director, General Manager and other roles within organizations such as Barclays Bank group of companies, 3I Group and TSB subsidiaries and was as a partner in Cullen Clarke a specialist financial services auditing firm in Dublin. He has acted as a advisor to many international groups on business transformation using leading edge technology, process re-engineering, assisting in new asset finance set ups, reconstructions, mergers and acquisitions.

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 canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Feature Report

Behind the scenes shot of Warren Waechter being interviewed (Top). Kevin Tink, vice president, at the auction mic (Left). A hydraulic excavator being sold in Chilliwack, BC (Above). Kevin Tink auctioneering from one of the auctions in Edmonton, Alberta (Opposite page)

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

Feature Report

Backstage Pass

to Equipment Auction Financing Selling Big with Ritchie Bros. Auctioneers By Ian Malinski

itchie Bros. Auctioneers is the world’s largest industrial auctioneer, with operations in more than 25 countries, including 44 auction sites around the world. In 2013 the company sold more than 300,000 equipment items and trucks for approximately $3.8 billion, including more than $1 billion sold in Canada alone. Based in Canada, this international success story started from humble beginnings in the 1950s in Kelowna, British Columbia, with brothers Ken, Dave and John Ritchie. The three brothers were running a local furniture store when their bank called in on a $2,000 debt. To raise the money the brothers decided to hold an auction, selling surplus assets from their store. Not only did the auction allow them to pay off their debt, it also helped them find their calling. Spurred by their initial success, the brothers decided to start an auction company and began conducting more regular auctions, soon branching

out into selling equipment, trucks and other industrial assets. Built on the core principle of conducting strictly unreserved auctions— where every item is sold without minimum bids or reserve prices—Ritchie Bros. has gone on to conduct auctions across North and South America, Europe, the Middle East, Australia, Africa and Asia. “We’re very proud to be a Canadian company and a leader in our industry,” said Kevin Tink, Senior Vice President, Ritchie Bros. Auctioneers. “Ritchie Bros. has been conducting unreserved public auctions for more than 50 years—it’s an exciting business; we get to work with the builders of the world. Our customers build roads and hospitals, grow our food and help provide our basic fossil fuels. Our job is to help these buyers and sellers exchange equipment with ease and confidence, that’s it.” Two years ago Ritchie Bros. was approached by Canadian television producer Tim Alp of Mountain Road Productions, based in Ottawa, ON, to

star in its own auction-related television series titled, Selling Big. “There were, and still are, a lot of hugely successful auctions shows: Auction Hunters, Auction Kings, etc.— so I thought we could take this concept to the next level and do a show about one of the biggest auction companies in the world,” said Mr. Alp, about Ritchie Bros. Auctioneers. “We presented the idea of the show to several TV networks and a local Canadian company called Blue Ant was excited to feature the show on their new channel Cottage Life. When we started to look deeper into this we really felt that with such interesting individuals, and the big machines and big money that these would be perfect ingredients to make a great TV series. And it turns out we were right... The series has been a big success.” The Selling Big series consists of 13 30-minute episodes shot at Ritchie Bros. auctions across Western Canada, including auctions at three of the company’s permanent auction sites in Edmonton, AB; Grande Prairie, AB;

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Feature Report and Chilliwack, BC. Designed to cover the entire auction story from start to finish, the show includes interviews with equipment sellers and buyers, auction action footage and a lot of equipment: from truck tractors to crawler tractors and from cranes to planes. “I couldn’t believe the passion the Ritchie Bros. employees had for their jobs” said Mr. Alp. “And the Ritchie Bros. customers were great—I don’t think I have seen that many millionaires in one place. They weren’t dressed in a suit and tie; they were salt of the earth people. The richest person in the room usually had on ripped jeans and a dirty shirt—these are regular people who have had great success by working hard. Many of them still operate the equipment, even if they don’t have to.” Selling Big also included a lot of behindthe-scenes auction footage most Ritchie Bros. customers would never see. The company takes great pride in conducting the most efficient auctions in the world, which includes painstaking attention to detail for equipment display, safety and marshaling equipment on auction day in front of bidders seated comfortably in heated auction theatres—a very important feature for a company that holds auctions in Edmonton, AB in December. “I was amazed at the whole process leading up to the auction,” said Mr. Alp. “It’s like seeing a fine piece of theatre coming together. Weeks and weeks of preparation all leading to the curtain coming up on auction day, it was impressive.” Ritchie Bros.’ Regional Operations Manager Warren Waechter was featured in several episodes of the Selling Big series—he loved the unique experience. “We hold ourselves to a very high standard at Ritchie Bros. because it’s critical to our success that every aspect of the auction and our equipment yard be organized perfectly or we risk things falling apart on auction day—it’s a big operation and it needs to operate like a machine,” said Mr. Waechter. “A benefit we didn’t think about is that Selling Big is a great learning tool for our employees. At Ritchie Bros. we are all usually so focused on our specific task—our cog in the wheel—that we don’t have time 14

Top row (L to R): Lisa Nault (Producer); Kim Schulz (Mgr, Corporate Communications & Events, Ritchie Bros. Auctioneers); Kevin Tink (Senior Vice President, Sales, Ritchie Bros. Auctioneers); Tim Alp (Writer, Director & Producer); Ray Walukiewicz (Yard Staff, Ritchie Bros. Auctioneers); Richard Nault (Location Sound). Bottom row (L to R): Stefan Shymanski (Camera Operator); Andrew MacDonald (Director); Michael Tien (Director of Photography)

see every aspect of the auction coming together. Our yard staff don’t get to experience sitting with a customer while his equipment sells, our administrative staff don’t get to experience how we setup all the equipment in the yard and our sales folks don’t get to see all the work done at our administrative offices. Selling Big allows us to show the auction process from all sides.” In 2013 alone, Ritchie Bros. helped more than 43,000 sellers around the world sell equipment, which is not an easy feat. Selling Big featured dozens of these sellers on the show, including Roy Isley of D & J Isley & Sons Contracting Ltd., who sold more than $8 million of forestry and transportation equipment at the company’s unreserved public auction in Grande Prairie, AB in June 2013. “It was a lot of fun being on the show and I would definitely do it again if I had the chance,” said Mr. Isley. “We’ve been selling with Ritchie Bros. since 1978 as we made adjustments to our fleet based on the different types of equipment we need for the jobs we are working on. The show was a great representation of everything Ritchie Bros. does for their customers, no matter how big or small. In fact, the episodes of the series I liked best were the ones with the “smaller” or first-time sellers—it was

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

great to see that no matter what the size of the company they always get the same great service from Ritchie Bros.” Unfortunately since the shooting schedule of Selling Big ended in early September 2013, the show’s overarching storyline of Ritchie Bros.’ $1 billion Canadian sales goal wasn’t able to be closed. “I can proudly say we achieved back-toback billion dollar sales records in 2012 and 2013 in Canada,” said Mr. Tink. “We were very excited to be involved with the Selling Big television show and I’m very happy with how it all turned out. It was great for current and potential customers to see all the different aspects of how our auctions work and we were glad so many of our customers were willing to be a part of the show.” Selling Big was one of the top two shows on the Cottage Life channel this past fall. The series has since been sold to networks in Australia, Italy and the UK and a special one-hour episode will be appearing in the United States this spring. While Blue Ant has not yet decided if they will go ahead with a second season of Selling Big, things are looking promising—here’s hoping. About the Author: Ian Malinski is Corporate Communications Lead at Ritchie Bros Auctioneers. Selling Big episodes repeat Wednesdays at 10 e/p on Cottage Life. Learn more at www.CottageLife.com.

EFLA Report

Economic improvement, favourable financing conditions will drive capital spending Top 10 Equipment Acquisition Trends for 2014 By E.L.F.A Staff

he Equipment Leasing and Finance Association (ELFA) which represents the $827 billion equipment finance sector, had outlined its Top 10 Equipment Acquisition Trends for 2014. Given U.S. businesses, nonprofits and government agencies will spend in excess of $1.5 trillion in capital goods or fixed business investment (including software) this year, financing more than half of those assets, these trends impact a significant portion of the U.S. economy. Businesses will need to consider a dynamic environment of economic growth, wider credit availability, and favourable interest rates in their equipment acquisition decision-making. ELFA President and CEO William G. Sutton, CAE, said, “For a majority of U.S. businesses, equipment financing is a critical source of funding, helping them to acquire the equipment they need to operate and grow. Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors. To assist businesses in planning their acquisition strategies, we have distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2014 Equipment Leasing & Finance U.S. Economic Outlook Report, industry participants’ expertise and member input from ELFA meetings and conferences to provide our best insight for the Top 10 Equipment Acquisition Trends for 2014.” ELFA forecasts the following Top 10 Equipment Acquisition Trends for 2014: 1. Investment in equipment and

software will reach an all-time high in 2014. As the U.S. economy and underlying economic fundamentals, including GDP, continue to improve, business investment is forecast to reach a record $1.5 trillion in 2014. 2. Equipment replacement demand will continue to drive investment. Stronger economic growth will boost businesses’ confidence and appetite for capital expenditures, but overall, equipment already in place can be used at a higher capacity. Until businesses find they need to expand their capacity to meet operational demands, their equipment investment will be in replacing existing aging or obsolete equipment. 3. Demand for equipment financing will increase due to greater stability in the federal budgeting process. Businesses will enjoy a greater level of comfort than they have in recent years to make their equipment acquisition decisions for 2014. The two-year budget agreement passed by Congress reduces fiscal pressures and lessens the chance of a potential government shutdown, while a rising tide of economic growth will lift all boats. As equipment acquisitions increase, so will businesses’ demand to finance them. 4. The global economy will play a part in the “big picture” impacting businesses’ equipment acquisition decisions. The lack of long-term breakout growth and expansion in equipment acquisition has some of its

causes beyond U.S. shores. External factors like the stagnant Eurozone, foreign oil prices and the cooling of a hot Chinese economy, which have combined to impede growth, will continue in 2014. 5. Rebounding of some industry sectors will spur varied equipment types. Growth in investment is forecast for numerous equipment types, some of which will be the result of increased activity in the housing and energy sectors. The rebounding housing industry will have spillover effects on equipment verticals, including construction as well as trucking and rail transportation to ship homebuilding supplies. Manufacturers’ plans for billions of dollars in investments to take advantage of cheap, rapidly expanding U.S. supplies of oil and natural gas will expand production capacity for energy and downstream products, such as petrochemicals and plastics, and increase demand for industrial equipment. 6. A majority of U.S. businesses will use some form of financing for equipment acquisition. In 2014, investment in plant, equipment and software in the United States is projected to reach $1.5 trillion, of which 57 percent ($860 billion) is expected to be financed through loans, leases and lines of credit, a slight uptick from 55 percent in 2013. In a continuing trend, seven out of 10 businesses will use at least one form of financing to acquire equipment.

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

EFLA Report 7. Credit market conditions will remain favorable for long-term equipment financing. In a continuing trend from last year, businesses will generally find an increasing credit supply as they consider equipment acquisitions. 8. A low short-term interest rate environment will continue, while long-

term rates will rise but remain below the historical average. Businesses that want to conserve cash and take advantage of the many other benefits of financing their equipment acquisitions can look forward to the prospect of continued low short-term interest rates until 2015. Although the Federal Reserve’s policy agenda for 2014 will

o t y s a E se U Prof Optiitable ons

Exceedinngly good insurance options for you and your cusstomers.

d e d d A lue Va What’s best for your customers is often what builds your business. When you offer a convenient solution to help customers easily meet the insurance requirement of their finance agreement, your benefits pile high. Options include: • Automated • Self Serve • Customized System Choice is good—find out about all the choices for your business. 866-676-5677 or EFSquestions@gaic.com

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

9. Technology innovations will continue to improve the customer experience. While demand for software and technology equipment is expected to remain strong, equipment finance companies will use technology to optimize their delivery and fulfillment systems around customer service. They will meet a growing demand for cloud and mobile technology as well as access to real-time company data and business intelligence. 10. Long-awaited changes to the lease accounting standard will continue to be debated. A new draft of proposed lease accounting changes issued by the Financial Accounting Standards Board and the International Accounting Standards Board issued in 2013 generated substantial opposition for being too burdensome and complex. As a result, the Boards will continue re-deliberations into 2014 and will conduct additional meetings to address concerns before changes are adopted. For forecast data regarding equipment investment and capital spending in the United States, see the Equipment Leasing & Finance Foundation’s 2014 Equipment Leasing & Finance U.S. Economic Outlook at www.leasefoundation. org/IndRsrcs/EO/.

www.GAIG.com Canadian Branch Head Office Scotia Plaza, Suite 2100, 40 King Street West Toronto, ON M5H 3C2

Policies are underwritten by Great American Insurance Company – Canadian Branch, a foreign registered insurer in all Canadian provinces and territories.

likely result in a rise in long-term interest rates, inducing some companies to lock in lower rates, they will remain low enough by historical standards to keep financing an attractive option for acquiring equipment.

About the Authors: The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $827 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 580 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/ packagers and investment banks, as well as manufacturers and service providers

Q1 SPRING 2014 • Canada’s Independent Magazine

FINANCIAL S

7 Reasons To Automate Accounts Payable Working With Marketing On Customer Data

Best Practices for Fighting Credit Card Theft & Fraud

Here Comes the Year of e-Everything

Are you responsible for your firm’s compliance requirements? Do you manage risk? Is your department responsible for ecommerce? Accounts payable?

Sign up NOW for a free subscription to Financial Operations magazine. Visit our website at www.financialoperations.ca and learn more about the magazine Financial Operations is a Lloydmedia, Inc publication. Lloydmedia also publishes Payments Business magazine, Canadian Treasurer magazine, Canadian Equipment Finance magazine, Direct Marketing magazine and Contact Management magazine.

ForeCast

The Long View Outlook for Lending in Our Industry

By Steve Geller

aving participated in the equipment finance industry for over thirty years I have a long view of the industry and the potential for growth in the industry in 2014. The recovery from 2008-2009 collapse seems to be continuing albeit slowly. The commercial banks, while they claim to be lending to small business, do not exhibit such loan growth in their financial reporting. Why lend at the historically low interest rate levels we are at? There is more profit; it seems, in credit card business, both on the consumer side and the fee income earned on merchant deposits. Where the banks have pulled back, the vacuum created has led non-bank financial intermediaries, including hedge funds, to move in and have been successful, for the most part. One of the major areas of play for these non-bank lenders has been in the merchant cash advance, short term working capital accounts receivable lending side. These lenders are heavily promoting the business within the equipment leasing industry through

association attendance and membership. Those rates are considerably higher than the rates we find in the normal equipment finance contract. The higher rates are needed as a hedge since a much higher risk is taken by the companies by lending to weaker credits and thus, banking on continuing operations by the borrowers. The cost of funds and the very short term nature of this business, usually no more than eighteen months, can be stifling to a company who has borrowed and was desperate for the money. Those lenders usually take money daily from credit card receipts or straight ACH from the borrowers accounts. That segment of the lending business must be doing well since at every conference I attend, more lenders show up! On the equipment side, there continues to be pent-up demand as machinery and equipment is stretched to a longer than expected life span. There needs to be the acquisition of replacement equipment and with technological advances, acquisitions that would be labor saving and produce product in a shorter and more efficient time span. Healthcare has been involved in upgrading recordkeeping computers to comply with Obamacare requirements.

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

Advances in testing equipment technology and the ability to do additional testing in-house on a routine business are pushing medical and optometric/ophthalmic operations to these purchases. With medical reimbursement, the equipment is being marketed by comparing the number of procedures per month needed versus the monthly payment. The laser industry continues to be strong with medical and non-medical uses, including day spas and related business. These have been and should continue to be active markets. Advances in communications and internet telephony and the advent of VoIP will continue to be a market that sees major companies cutting the cord with the old school telephone companies. New uses and advancing technology and social media involvement can only increase the acquisition of computer based equipment. While North American manufacturing has been decimated over the last several decades by Asian low-cost production, we are seeing significant issues in those countries. In China, where there is significant pollution and use of an underage and under-paid workforce, production is suspect for the use of toxic chemicals

Forecast and sub-par and unsafe production. Hazardous waste has caused pollution in rivers and water supply. Coal-fired plants are causing significant smog. After much negative publicity in North America about such practices, the out-sourcing of such production is being reconsidered and we are starting to see a growth of “Made in America” products. With a much unused production facility base available for use by entrepreneurs for small scale production, and with contract labor available for larger businesses we should continue to see outsourcing to Asia abating. Notwithstanding such pullback there remains and will continue to remain major product manufacture in Asia. Whether these countries can reform their practices is questionable and may ultimately lead to ever-increasing domestic production in the North America. As we become a more computerbased economy the development of new technology-based ventures should continue and increase the need for additional production facilities and the acquisition of new equipment. Technology start-ups, around the world, should continue, and assist in the employment of new labor, which will translate into greater consumer demand. Hopefully such demand translates into domestically produced goods and the increased need for machinery and equipment. ABOUT THE AUTHOR: Steve Geller is an industry veteran for over thirty years and is a former executive at several financial institutions operating third-party brokerage businesses. He has operated Leasing Solutions LLC since 2001 and acts as a financial intermediary assisting lease brokers and leasing companies in the placement of business with lenders. In addition Steve has evaluated lease companies and portfolios for purchase by lenders and other leasing companies. He is based in Palisades, New York at www.leasingsolutionsllc.com and his email address is steve@leasingsolutionsllc.com

LOOKING AHEAD:

How They See It EY on Mining and Metals

Improved credit availability is set to drive momentum in the mining and metals sector in the year ahead, according to EY’s Capital Confidence Barometer: Mining & metals sector. Fifty-five percent of companies are already focused on growth — compared to 38% in 2012. “Transactions in the mining and metals industry have dropped considerably over the last year as companies struggled with capital allocation and access to capital challenges,” says Bruce Sprague, EY’s Canadian mining and metals leader. “Deal volume and value have fallen 36.9% and 58.1%, respectively, year over year in Canada alone. Now it looks as though that tide may be turning.” Forty-seven percent of mining and metals companies believe credit availability is improving in the sector – and 72% believe the global economy is improving compared to 57% six months ago.

RBC on Manufacturing January data pointed to a setback for the manufacturing sector at the start of 2014, according to the RBC Canadian Manufacturing Purchasing Managers’ Index™ (RBC PMI™). A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), the RBC PMI offers a comprehensive and

early indicator of trends in the Canadian manufacturing sector

Element On Growth Element Financial Corporation expects to organically originate more than $3.8 billion of new equipment loans and leases during 2014 across the Company’s five North American market verticals representing an increase of 80% over the $2.1 billion Element estimates it originated in 2013.

Basware on Customers Basware, the leading provider of e-invoicing and purchase-to-pay solutions, anticipates several key trends that will impact finance and procurement in the coming year, including the fast growth of social, mobile and cloud computing that will fuel the rapid rise of e-invoicing and e-payment services. Additionally, as organizations continue to face intense pressure to improve cash flow, they will turn to innovative payment strategies to accomplish this goal. “In 2013, companies have been focused on improving their cash flow and we expect this to continue as a key focus in 2014,” said Esa Tihilä, CEO of Basware. “Effective payment strategies will stay top of mind as organizations look to maximize working capital and ensure the financial stability of their suppliers.

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 | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Forecast

Credit Outlook for 2014 and Beyond: FEI Canada Survey Improvements are expected, funds are becoming more available he Canadian financial executives think that the business environment will continue to improve in the next 12 months, and that credit for working capital and growth financing is generally more available to their organizations than in previous years. However since the 2008 credit crunch, many Canadian companies, both large and small, continue to focus primarily on cost efficiency while being more conservative in investing for growth, both organic and inorganic. These are the main findings of Optimizing for Growth: Working Capital and Credit Availability, a research study by the Canadian Financial Executives Research Foundation (CFERF), and sponsored by EY Canada. This report by FEI Canada’s research arm in its fourth annual survey of the country’s chief financial officers and other senior financial executives on credit availability and working capital issues. This year’s conclusions are in line with last year’s findings. Many survey respondents stated they are playing an increasingly strategic role in driving operational efficiency, including cost reduction and working capital improvement. Cash flow is both the lifeblood of a company and a critical indicator of its current financial health. The availability of working capital is crucial to ensure an organization can continue its operations and has the funds necessary to support short-term debt obligations and operational expenses. For the purpose of this study, working capital is defined as the net liquid assets (current assets minus current liabilities) available to a business to meet liquidity needs of day to day operations. Maintaining a healthy level of working capital can be an all-consuming focus for a company when cash is in short supply.

Savvy cash flow management is a priority in times when credit is more difficult to obtain. When cash demands are high or credit availability is constrained, companies look to create liquidity for the variety of different funding needs within the business. Working capital is most affected through the management of three major areas: receivables, payables and inventory. These typically represent the primary areas in which a company can influence working capital in the short term without the need for external financing. Despite a high focus on working capital management, there may be limits to how a company can significantly impact operational working capital. Therefore, the availability of external financing in its many forms is a constant focus for financial executives. Companies saw firsthand how quickly credit availability can be squeezed during the recession of 2008 and 2009 and remain watchful for signs that credit flow could lessen in the near term. This study presents the perspectives of Canadian financial executives regarding the importance of working capital management and the availability of credit. It details strategies their companies have used to improve business performance and manage working capital, solutions put into practice to drive financial and operational improvements and how they have optimized capital structure and satisfied the credit requirements for their organizations. Insights brought to light through the survey of 121 financial executives and roundtable sessions found that the executives are more optimistic about the prospects for their company than they were a year ago – 46% are more optimistic compared with just 16% who are less optimistic. Other key survey highlights include:

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

◉◉ 55% of companies indicated their primary focus for the next 12 months is on organic growth, while only 31% are looking at inorganic growth such as through mergers and acquisitions or joint ventures. ◉◉ 56% of companies reported under performance on revenue growth targets while 22% cited liquidity pressures. ◉◉ nearly two-thirds of companies (64%) are expecting higher interest rates over the next 12 months. ◉◉ 38% of companies which expect interest rates to rise plan to mitigate the effects of higher borrowing costs through fixed rate debt, the use of interest rate swaps or options (14%), and refinancing floating rate debt to fixed rates (8%). ◉◉ 44% of companies have experienced customers delaying an invoice payment and 31% have had customers going through financial difficulty over the past year. ◉◉ 60% of companies expect cost reduction and process efficiency to be the most important areas of focus when it comes to business improvement for their companies over the next two years. This study comprises the results of an online survey of Canadian financial executives which took place between September 17, 2013 and October 11, 2013. A total of 121 respondents completed the survey. Further insights were gathered at executive roundtables in Toronto and Montreal which took place simultaneously, connected by video conference, on October 9, 2013. Fewer than one-half (45%) of respondents were CFOs, and 18% held the title of VP Finance. Respondents were drawn from a wide range of industry groups and sectors.

Forecast Of the respondents, 49% were from private companies and 37% from public.

Optimizing for Growth: Working capital & credit availability business environment and outlook More than one third of companies are more optimistic about the current business environment, with 38% being more optimistic about the economy in their sector, while 11% reported that they were less optimistic. Half (51%) stated that business conditions are unchanged from a year ago. Of the financial executives surveyed, less than half (46%) reported that they were more optimistic and 16% were less optimistic. Those expecting a year very similar to the last accounted for 38% of respondents. See Chart 1. The near-term need for credit was highest among small public companies: 19% said they require a significant debt refinancing in the next 6 to 12 months, compared to 5% of companies overall.

Chart 1: Compared with 12 months ago, are you more or less optimistic about prospects for your company?

16%

Less Optimistic

46%

38%

More Optimistic

No Change

Large private companies reported the least requirement for credit â€“ 72% reported no need for refinancing. Small public companies are the hungriest for new capital, with 44% stating that they had either recently completed a major debt refinancing, were in the midst of one, or would complete one over the next two years.

Large public companies have been actively raising cash through credit, perhaps acting to lock in historically low rates before an inevitable rebound in interest rates. A total of 17% reported that they completed a significant financing less than a year ago and another 14% said that they completed a significant debt financing one or two years ago. Eight percent said they were in the midst of one. The findings echo EYâ€™s Capital Confidence Barometer highlights from October, 2013. That study found credit is increasingly available globally as almost half see improvement. The turnaround in availability of financing is most significant in Canada, where those who say credit availability is improving rose to 45% in April from just 20% in October of 2012. About the Authors: THE Canadian Financial Executives Research Foundation (CFERF) is the non-profit research institute of FEI Canada. The foundationâ€™s mandate is to advance the profession and practices of financial management through research. Financial Executives International Canada (FEI CANADA) is the all industry professional membership association for senior financial executives. EY is a global leader in assurance, tax, transaction and advisory services.

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Technology

Prepare Now For Migration to your NextGeneration Credit Organization Solution By Charles Lyle

he overall economy is starting to shows signs of recovery and companies are evaluating their operations to determine the most cost effective way to manage the pending growth. Capital infrastructure investments have been lacking across all industries for some time which has led to a huge backlog of potential investments across the board. Once these investments start to occur, it should benefit all financing companies alike. Within the financial industry, companies need to prepare for the influx of this business once the flood gates open and the economy gets fully back on track. The question is: Can companies continue to rely on manual processes or older systems that do not take advantage of the newest advancements in technology which help streamline the decision and operational processing times in order more efficiently service customers? In the meantime, due to the economic meltdown, companies have been looking for ways to grab their share of a decreasing market. Does that come in the form of higher service levels, reduced turnaround decision times and / or additional product offerings? Competition is fierce which has led to faster decision times and higher service levels. Is your company keeping up? How does a company keep up and differentiate itself? Companies need to integrate technology as a means to facilitate these items by streamlining their processes, allowing employees more time to focus on revenue generating activities. Some companies have been using legacy based systems for many years and the cost to swap them out could be extremely expensive as well as risky.

Companies have also been hesitant to switch since, for the most part, their current solution works. However, those systems are usually limited in what they could do in relation to the customer interfacing aspects of your business which directly relates to companies being able to quickly quote deals and provide meaningful credit decisions in a timely manner. Now is the time for companies to evaluate and implement state-of-the-art credit origination systems that would immediately satisfy those needs and easily integrate with your current back-end provider. This provides companies the benefit of leveraging newer technology where it matters most, revenue generation, while lowering their overall risk allowing their legacy back-end system to stay intact. Whether you are a small, middle and/ or large ticket lessor, you need to ensure your operation is running efficiently by leveraging adaptable software allowing you to quickly adjust as your business needs change.

Evaluation Process Businesses today are looking for systems that can readily improve their processes by eliminating manual steps thereby improving operational throughput. Each transaction needs to be handled with minimum effort while defining responsibility at each step. The system needs to be more intuitive and adaptive to meet the current and future needs of evolving businesses. Businesses require systems to be rich in functionality as well as scalable. Credit Origination Systems need to leverage state-of-the-art technologies to meet the ever changing business environment. Systems need to quickly adapt by providing workflow tools and business rules that match the various financial current and future product offerings of a given company. Systems

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

need to be user friendly and web-enabled with screens effectively tailored for each process while providing exact information needed at each step. All of this flexibility needs to be inherent within a system to keep cost down relating to such changes. Having systems with administration tools that provide companies more control of their systems is imperative to ensure quick adaptation to solve the various business changes that arise.

System Selection Criteria Companies should evaluate 3 software solution providers to determine which one best fits short and long-term objectives. Systems today are architected to be open and have technology that easily allows them to integrate with each other. This provides companies the ability to pick the best-of-breed solution, regardless of their back-end provider. Each provider should demonstrate the following functionality: 1. Configurable workflow and screen designs to ensure required information is captured as needed at each step; 2. Ease of use; 3. Integrate real time with 3rd party providers; 4. Customer Relationship Management functionality or ease of integration with a 3rd party provider to process quotes, track sales leads and convert to applications; 5. Integrated rate cards capabilities; 6. Easily attach external documentation sent by your respective business partners to given deals; 7. Automatic generation and packaging of business documents ; 8. Automatic notification of deals as they make their way through your operation; 9. Real-time seamless integration with your back end providers;

Technology 10. Online history tracking of changes that occur within the system and reporting to ensure proper compliance tracking; 11. Administration tools so companies can easily manage the system.

Migration Part of the system evaluation process has to include a review of the software providerâ€™s personnel relating to their knowledge and experience of the equipment financial marketplace. They ultimately are going to be the key to the success of the implementation ensuring it meets the objectives and is installed in a timely and cost effective manner. Advanced technology is only useful if properly implemented. Understanding the data conversion requirements and the capabilities of the software provider and of their software is also critically important as well. To ensure a successful implementation, part of the plan should include a full discovery process to ensure increased efficiency and productivity. The discovery process should evaluate: 1. The current business state and future direction; 2. Review specific requirements for different types of transactions and note any gaps; 3. Timeline and costs to resolve any gaps issues noted; 4. Workflow and business rules discussions in order to look for ways to leverage the software to increase productivity and efficiency. 5. Company personnelâ€™s availability to work on the project in conjunction

with the software provider. Leveraging a solution providerâ€™s knowledge of the leasing industry and their overall technology experience is key to creating an optimum solution for any business. However, it should be noted that it is also key that companies engage heavily during the discovery phase to share the knowledge of given business practices and the industry as a whole. It is critical to view this as a partnership and work diligently as a team to ensure its overall success.

Conclusion It is important to evaluate perspective software providers from many aspects to ensure a longterm successful partnership. While they understand their products very well, it is imperative that they understand the business to ensure the success of the partnership. It is hard to gauge when the economy will fully rebound given the slow agonizing financial recovery over the last few years. Most companies have cut back staffing due to the slow economy and now need to make the decision as to the best way to support the growth as the economy recovers and the backlog of demand finally comes to fruition. No matter what the plan is to support growth, technology needs to be a critical component to ensure your business runs efficiently now and into the future. About the Author: Charles Lyle has 29 years of software industry experience including 22 in the leasing industry. He is a recognized expert in the finance market and has in-depth knowledge on how business and technology work together to make companies successful.

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Forecast

Human Capital in 2014

The Challenge of Finding and Keeping the Right People By Bill Hughes

ith the increasing number of new companies getting into leasing, and with banks increasing their focus on opportunities within equipment finance, what was already a significant challenge, recruiting and retaining talent, is about to get that much harder in the coming years. Having a sufficient number of people with the specialized knowledge and experience could very well become the factor that limits the ability to grow. It won’t be business opportunities, that’s for certain. This article will explore several practical strategies for dealing with this difficult challenge. First we’ll tackle recruiting. I won’t cover the obvious tactics such as recruiters, job sites and raiding your competitors—you are already doing those, but there are things you can do to make your efforts more effective. First, consider the key attributes of any job: 1. The ability to improve your life 2. The ability to improve the lives of others 3. Being part of something 4. Intellectual growth

A job has to tick the boxes in most or all of those categories if you want to compete in today’s talent market. In the first category are things such as pay, location (more time for personal 24

life), on-site child care (more time with family) and so on. Unless you are offering vastly superior earnings potential, you’ll need to make other elements in this category more attractive to really make yourself stand out. Flex time is one very effective and inexpensive way to do this. Onsite day care, while much less common today, is one of the single biggest moves you could do to attract and retain talent through improving employee’s lives. Having worked for a firm that provided it, I’ve seen this effect first hand. Consider: Job ‘A’ pays a bit better and may be more “cutting edge.” Job ‘B’ allows you to take your kid to work with you, go take a nap with them on rough days and see them parade through the halls with all the other kids on Fridays. Almost any working parent with young kids is going to choose job ‘B’, guaranteed. It doesn’t even have to be completely company subsidized, just having it as an option can often be enough, so it may not be as expensive as you would think. The ability to improve the lives of others may seem to be a harder category for leasing and equipment finance firms to tackle than it is for some professions. For doctors, teachers, etc., the link is obvious. But for financial firms, the link is still there. How well would the world economy work without capital-efficient ways of obtaining necessary equipment

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

and resources? You know the answer, but the generation coming out of college today most likely doesn’t. So when you are posting ads or talking to applicants, don’t be shy at making it clear to them that without companies like yours, there would be no factories to build their cool smartphones and no internet to send cat photos across. Give specific examples of what your clients have been able to accomplish with your company’s assistance. This also helps cover the next category, “being part of something,” because if someone is interviewing with people who are passionate about what they do and the impact they have, they will want to be a part of that team. Being part of something; there is so much to be said about this, it probably deserves its own article. In a nutshell, a big part of why people work, and probably the major reason they stay at a company once they are there, is a sense of belonging. If someone is working in an environment where they feel like they are an integral part of a cohesive whole, working together to achieve common goals, it will take a lot for that person to leave. If someone finds themselves in a highly politicized environment where success is viewed as a zero sum game, and/or where management’s philosophy is to put everyone under stress and

Forecast competition to see who emerges victorious—well, which place would you rather work? Which place feels more like “home?” Business is demanding, and competition fierce, but the competition should be with competitors (hence the name), not with people who should be comrades in the battle. Employees also crave intellectual growth. What that means is different for everyone. It could be as simple as feeling like you are able to stay current on the latest lease accounting standards (OK, bad example of “simple”) or as complex as wanting to be able to try your hand at a completely different role. The bottom line here is that if you want to keep the “A” players, the people who are constantly coming up with new ideas and innovations in process, products, and tools, you need to create an environment that facilitates, supports and actively encourages intellectual growth. If your company has achieved perfection and now all you need to do is keep doing

exactly what you do now over and over and over, then this may not apply to you, and you can safely ignore this category. And as for recruiting tactics themselves, here are a few ideas to consider: ◉◉ Get creative. Many companies covet the deep domain knowledge and hands-on experience that your people have. Software providers, I can tell you from personal experience, often struggle with ways to teach engineers and consultants the real life issues you have to contend with. Conversely, as a company primarily in the finance industry, you may have issues keeping your IT people up to speed on the latest technologies and products. Work out a trade. Send a couple of your developers over for a six month learning stint at one of your software providers, and have them send a couple of their new business analysts or product managers over to work for and learn from your team. Establish a

process for allowing each other to keep some of the promising ones. ◉◉ Establish partnerships. Work with local universities to establish internships for undergraduate or graduate students. After working with you for a couple of years during school, you’ll probably be able to convince that new accounting or finance graduate to come work for you (assuming you satisfy the four criteria we discussed above of course). Good talent is hard to find and keep, and that is not likely to change any time soon. But if you put as much thought in to differentiating yourself as an employer as you do in differentiating yourself to your clients, it is possible to stand out from your peers and attract and retain the best. About the Author: With more than 20 years of experience in enterprise software and services, Bill Hughes serves as Executive Vice President, Linedata Lending and Leasing. Hughes oversees Product Development, Professional Services, Quality Assurance, Customer Support, Finance, and Hosting Services. Prior to joining the Capitalstream team, Hughes was Executive Vice President of Operations at Corillian, a leading provider of online banking solutions.

canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Your Business

The New Marketing: Are we struggling to adapt in the equipment sector? By Roxana Safranek

echnology advancements have changed the way we conduct business, and as a result, has changed the way we approach marketing. This new era of marketing is centered on engagement and targeted, relevant messaging. Unfortunately, many equipment finance companies are struggling with this new style of marketing. Here are the common challenges equipment finance companies are dealing with: ◉◉ Not having a plan. For many in the equipment finance industry, marketing is an afterthought or a one-off experiment with no end-game. With this approach, many companies rely on random referrals and a few marketing tactics. Others may try a shotgun approach, trying a variety of things without any real strategy. Unfortunately, these approaches rarely succeed. ◉◉ It’s easy to understand how this happens; many equipment finance companies juggle a litany of responsibilities, but in order to be successful with marketing, you need to develop a marketing plan. The good news is, developing a marketing plan doesn’t have to be complicated. A basic marketing plan entails nothing more than setting goals, making a to-do list with associating timelines and defining a way to track the progress. ◉◉ Lack of expertise. Many equipment finance companies lack marketing expertise. This can be a setback when it comes to planning and

8 26

implementing an effective marketing strategy. Businesses lacking marketing expertise tend to keep doing what they have been doing for years. Having a marketing resource, with some level of marketing expertise, is a big part of ensuring you are efficient with your marketing and see a return on your investment. ◉◉ Lack resources. Some companies have marketing knowledge, but they lack the resources to put anything into place. A lack of resources could refer to budget, people, time or a combination of all three. Although this can be a challenge, it shouldn’t stop you from trying to market. Instead, develop a plan with the resources you have, and only invest in marketing that targets your ideal customer. Targeted, actionable and measurable marketing is the ONLY thing that makes sense if you are operating with limited resources. ◉◉ Information overload. There is so much information available on marketing; it can numb the mind in a matter of minutes. The bad thing is, if you’re overwhelmed by the amount of change and choices you have, you’re more likely to do nothing. This is when you need to go back to your marketing plan. What are your goals? What is the best approach to achieve them? How are you going to track your progress? Taking on too much and trying to do everything, can cause more harm than good. Take baby steps and use a trial and error approach. Once you find something that works, stick with it and then continue to test other ideas.

◉◉ Expecting too much, too soon. Many times businesses develop a brochure, run an ad, attend a networking event, or send out postcards and then are disappointed with the amount of response. It’s important not to lose sight that marketing is about developing relationships, and that it takes time to build interest and trust. In fact, turning a prospect into a new customer may require reaching out several times before they feel like they “know” and “trust” your company enough to do business with you. It’s important to stay the course, follow your marketing plan and talk to other businesses that have been down the same path. You’ll discover there is no such thing as instant success. ◉◉ Underestimating the value of your existing customers. Most businesses think the way to increase sales is to focus primarily on new customer acquisition. That’s a mistake, especially given the high cost of acquisition for each new customer. Effective marketers invest in nurturing existing customers to build customer loyalty, improve retention rates and create additional sales opportunities. By implementing regular, meaningful marketing communications, you will keep your customers engaged and interested in your company and its solutions.

About the Author: Roxana joined LeaseTeam in February, 2011 as Director of Marketing. Roxana has over 15 years of marketing experience with 11 of those years being in the software industry. Roxana is a certified marketing professional, in both traditional and electronic marketing, and has authored many articles and spoke on various marketing topics.

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

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

Technology

Stakes are high in 2014 for IT equipment suppliers By Tracy Prochaska

t is no secret that IT investing in the equipment finance industry has long been driven by a desire to sweeten the bottom line. Until recently, companies embraced new technology primarily to eliminate manual processes and improve how they managed portfolio leases and loans in order to reduce costs, speed up approvals, and book more deals. However, that fundamental business model seems to be changing and it is changing fast. The current regulatory environment is causing the commercial financing market to undergo a nearly unprecedented sudden shift in priority. Compliance now tops the list as the most concerning business issue for most companies, so much so that many are fast-forwarding IT investment plans in the quest to capture more data and augment their reporting capabilities “ASAP.” Faced with glaring information gaps, the vast majority of companies in this market realize they have to make urgent improvements to internal processes and IT systems just to stay in the game. At a minimum, this realization often entails consolidating legacy systems and investing in new software so they can get access to the information needed to prove to regulators that they have a tight rein on risk across their enterprise. The question now popping up in boardrooms across the industry is not “whether” a business needs to make additional IT investments, but rather “who” they can trust as a technology partner to help them achieve compliance as quickly as possible. As a result, the stakes are higher than ever for equipment finance software providers. It’s no longer enough just to automate mere pieces of the commercial financing puzzle. To remain competitive, vendors must be able to demonstrate a proven track record of success in delivering sophisticated software that enables their customers to capture, report on, and easily access critical information needed to meet compliance objectives. Demand

is high for a full lifecycle service solution that allows information to flow freely back and forth between the front and back office without critical data falling through the cracks. Software must capture data upfront right when a lease or loan is first originated, record each step as it is funded and approved, and then feed that data directly into back office portfolio management systems. Obviously, any equipment finance solution worth its salt today must also come equipped with a powerful reporting engine. Companies need the flexibility to do everything from scheduling and distributing standardized reports to creating ad-hoc reports on the fly and merging data from other systems to give themselves (and regulators) a complete picture of overall risk. With good reporting comes improved data collection. The ability to add more fields, track those data values, and standardize fields and

formats to provide high quality, reliable data is now more crucial than ever. The upside to this recent shift in business priority is that while companies are striving to achieve compliance within the timeframes laid out by regulators, they are also simultaneously making huge gains in business intelligence. With the data they have always wanted now available right at their fingertips, they can better analyze deals and find new ways to reduce risk and grow their business. Once they have overcome the hurdle of finding the right technology partner and putting the right software solution in place, companies will see that compliance is a win-win for their own business as well as for the commercial financing industry at large. About the Author: Tracy Prochaska is Director of Marketing for International Decision Systems. She is responsible for global marketing/ demand generation activities and works closely with senior leadership, product management and sales teams to drive overall corporate results

ERS OK TED R B AN W

PROUDLY CANADIAN SINCE 1981 MEMBER OF THE CFLA

Specializing in New & Used Manufacturing & Construction Equipment

Advant Leasing is an independent family owned business that has participated in the Canadian Commercial and Industrial Lease Industry for over 35 years. We specialize in assisting all types of businesses to acquire the specialized commercial equipment required to be productive and grow their business.

NEW BROKERS WELCOME • Fast approvals • Flexible terms • Start-ups accepted

• Decisions made in house/no securitization • Customized financing solutions • Small business specialists

Get started today with Advant, helping you grow with the tools that you’ll need.

Please contact Jason Bonneville • jason@advantleasing.com 905-335-3301 ext 224 • www.advantleasing.com canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

vendor directory Providing practical and cost-effective legal services to the Equipment Finance Industry for 20+ years 905.940.8700 â€˘ 1.866.508.8700 â€˘ 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.

ÂĄÂŒÂ’Â“Â?ÂŽÂŠÂŁÂ“ÂšÂ‘ 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

â€˘ Equipment, Vehicle, Any Asset Leasing â€˘ Business Firstâ„˘ Solutions â€˘ Simple or Complicated Letâ€™s talk about your leasing software needs. 888-747-RYZN (7996) | info@ryzn.com | www.ryzn.com

Get your ad on this page for as little as $185 per issue for all of 2014

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

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

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

events

WHERE TO GO. WHAT TO SEE.

Find out more about the conferences, exhibitions, seminars and meetings in your industry January 26-29, 2014

April 23, 2014

June 1-3, 2014

American Securitization Forum ASF 2014 Las Vegas, NV www.americansecuritization.com

Equipment Leasing & Finance Association ELFA Captives Best Practices Roundtable Chicago, IL www.elfaonline.org

Equipment Leasing & Finance Association ELFA Credit & Collections Management Conference Cincinnati, OH www.elfaonline.org

February 23-25, 2014 Equipment Leasing & Finance Association ELFA Equipment Management Conference Phoenix, AZ www.elfaonline.org

March 9-11, 2014 Equipment Leasing & Finance Association ELFA Executive Roundtable Bonita Springs, FL www.elfaonline.org

March 20, 2014 Equipment Leasing & Finance Association 13th Annual IMN/ELFA Investors Conference New York, NY www.elfaonline.org

April 23, 2014 Equipment Leasing & Finance Association ELFA Independent Best Practices Roundtable Chicago, IL www.elfaonline.org

June 1-8

April 23, 2014

September 8-9, 2014

Equipment Leasing & Finance Association ELFA 26th Annual National Funding Conference Chicago, IL www.elfaonline.org

Equipment Leasing & Finance Association ELFA Operations & Technology Conference Atlanta, GA www.elfaonline.org

May 1-3, 2014

September 8-10, 2014

Natâ€™l Assoc of Equip Leasing Brokers NAELB 2014 Annual Conference Orlando, FL www.naelb.org

Equipment Leasing & Finance Association Lease & Finance Accountants Conference Atlanta, GA www.elfaonline.org

April 2-4, 2014

May 4-6, 2014

National Equipment Finance Association NEFA 2014 National Equipment Finance Summit Scottsdale, AZ www.nefassociation.org

Equipment Leasing & Finance Association ELFA Legal Forum Washington, D.C. www.elfaonline.org

April 9-12

May 7-9, 2014

Factoring Association 20th Annual Factoring Conference San Francisco, CA www.factoring.org

Equipment Leasing & Finance Association Public Sector Finance Forum Washington, DC www.elfaonline.org

April 23, 2014 Equipment Leasing & Finance Association ELFA Bank Best Practices Roundtable Chicago, IL www.elfaonline.org

May 14-15, 2014 Equipment Leasing & Finance Association ELFA Capitol Connections Washington, D.C. www.elfaonline.org

Credit Scoring & Risk Strategy Association 21st Annual Conference Niagara Falls, ON www.csrsa.org

September 10-12, 2014 Canadian Finance & Leasing Association CLFA Annual Conference 2014 Whistler, BC www.cfla-acfl.ca

September 14-16 IFO Canada 4th Annual Canadian Financial Operations Symposium Vancouver, BC www.financialops.org/canada2014

October 19-21, 2014 Equipment Leasing & Finance Association ELFA 53rd Annual Convention San Diego, CA www.elfaonline.org

Visit us online www.canadianequipmentfinance.com/events.html canadianequipmentfinance.com | January/February 2014 | CANADIAN EQUIPMENT FINANCE

Observations

Are we there yet? By Rob Birnie

took my family skiing last week and, as the inevitable chorus of “Are we there yet?” rang from the back seat, I had reason to reflect on the similarities between family vacations and completing appraisal assignments. On the surface, this seemed ludicrous, but as I thought more and more about it, I began to think that the comparison is not quite as crazy as it sounds! Like a vacation, the leadup to an appraisal assignment includes a lot of planning, identifying the scope of the assignment, finalizing coordinating equipment inspections, finalizing the budget and pricing for the assignment. This negotiation between the lender and borrower can take weeks, and in some cases, months to complete. After these steps are complete and the deal (or “vacation”) is planned, an appraiser is selected and the assignment is issued. This is when we “hit the ground running”, inspections begin – and when appraisers begin fielding completion date questions – those questions which are so analogous to that echoing throughout my car last week, “How much longer until we’re there?”

The urgency of completing an appraisal is of paramount importance in our assignments and to our clients. At the point an appraisal is requested, it is one of the last requirements for completing a deal. There is tremendous focus from all sides to complete this step as quickly and completely as possible, and any delay is subject to immediate escalation or to risk loss of the deal to the lender. We, at Verus, understand the competitive nature of the finance industry and recognize that lenders are under constant pressure to aggressively reduce deal completion times while still adhering to risk management guidelines. To meet these targets, we have introduced a number of service offerings which include appraisal turn-around times of less than 4 business hours, however in some cases even this is too long -- In January, for example, we received a request to complete an inspection report for a machine scheduled to be delivered to the buyer within the hour. We are researching ways to perfect time travel, a skill which I firmly believe is the best tool an appraiser can have at his fingertips. In an industry where requests to provide a full appraisal

CANADIAN EQUIPMENT FINANCE | January/February 2014 | canadianequipmentfinance.com

of 20 assets located at 8-10 locations throughout the province and to provide a final report within three business days, thinking outside the box is the best option for meeting and exceeding our client expectations. Last month, we made a tremendous breakthrough in our initiative. An assignment request from one of our more time sensitive clients came across my desk. The request did not specify the equipment operator’s name or location, but the list of assets included serial numbers which were a direct match to a report we had prepared 2 weeks previously. It gave me great pleasure to pick up the phone and let our client’s credit department know that, “We’re happy to provide a proposal for the assignment, but we think we can save some time by just sending over the completed appraisal this afternoon”. I think this may have set the bar a bit high for future assignments, but (unlike my ski trip), I did not hear a single refrain of “Are we there yet?” 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. He doesn’t mind the snow. Much.

Lloydmedia Inc

Published on Mar 20, 2014

Canadian Equipment Finance Magazine JanFeb 2014

Published on Mar 20, 2014

dmn.ca

Go explore