Capital Leasing Pilot Project

For more information regarding loans under the CSBFA see the document Canada Small Business Financing (CSBF) Program.

Eligibility Criteria

Summary

Which capital leases are eligible?

Capital leases may be used to finance:

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

Which capital leases are not eligible?

Capital leases under the pilot project are not eligible:

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

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

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

What is the maximum term of a capital lease?

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

What is the maximum rate a lessor can ask for?

The imputed rate of interest (which is used to calculate the scheduled payments) cannot exceed 13.25% plus the Government of Canada bond rate for the term of the lease. This interest rate includes an administration fees of 1.25%.

Any other costs?

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

Who issues these capital leases?

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

How do I apply?

Contact participating lessors to find out more about the capital leasing pilot project. The list of participating leasing companies in the Capital Leasing Pilot Project is regularly updated on the Web site.

Publications

The following information may be obtained from the Web site.

• Information Brochure;
• Canada Small Business Financing Act;
• Small Business Loans Program (for loans made before 1 April 1999);
• Canada Small Business Financing Regulations;
• Guidelines for Lenders;
• Lender's Program Forms;
• How to use the Capital Leasing Pilot Project Regulations
• An Invitation to Participate in Capital Leasing
• Capital Leasing Pilot Project Guidelines
• Forms for lessors
• Annual Reports;
• Other Program Publications.

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

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

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

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

Alberta Contact(s):
The participating lessor of your choice.

British Columbia Contact(s):
The participating lessor of your choice.

Manitoba Contact(s):
The participating lessor of your choice.

New Brunswick Contact(s):
The participating lessor of your choice.

Newfoundland & Labrador Contact(s):
The participating lessor of your choice.

Northwest Territories Contact(s):
The participating lessor of your choice.

Nova Scotia Contact(s):
The participating lessor of your choice.

Nunavut Contact(s):
The participating lessor of your choice.

Ontario Contact(s):
The participating lessor of your choice.

Prince Edward Island Contact(s):
The participating lessor of your choice.

Quebec Contact(s):
The participating lessor of your choice.

Saskatchewan Contact(s):
The participating lessor of your choice.

Yukon Contact(s):
The participating lessor of your choice.