Find Lawyers in Toronto, Ontario for Equipment Finance Law

Equipment Finance is best defined as a finance transaction, whether loan or lease, secured by long term tangible assets of a company (other than real estate). It is distinct from traditional bank financing in that the primary focus of the credit is the value of the asset being financed (as opposed to the creditworthiness of the obligor). It also differs from asset based lending which focuses primarily on short-term assets, the receivables and inventory of the company. While the creditworthiness of the obligor is important in structuring an equipment finance transaction, it tends to reduce the inherent risk and thereby the interest rate; as such, it increases the range of available funders but the primary basis for credit approval remains the asset being financed. A number of active equipment finance companies are non-Canadian, and a thorough knowledge of cross-border issues is required to work with those funders.

Finance Sources

Equipment financiers include commercial banks, independent leasing and finance companies, manufacturers and their related finance companies, and conduit based programs. What distinguishes the equipment finance industry from other sectors such as banking or asset based is the inter-relationship of the finance providers. A transaction originated by one finance provider is often sold to another member of the equipment finance community. Finance companies are often both co-operative and competitive at the same time. A skilled equipment finance lawyer needs to be sensitive to this interrelationship when structuring transactions.

Types of Assets

Financed assets include every form of personal property from computer equipment, software, office equipment, mining, and agriculture to aircraft, railcars, and ships. Each asset class has its own unique challenges and requirements.

Structure

The form of an equipment finance transaction is varied but the most typical structures are:

1. Leases (each of true, finance, and synthetic)
2. Conditional Sales Contracts
3. Loan and Security Agreements
4. Instalment Payment Agreements
5. Interim Finance Agreements
6. Vendor Program Agreements

 Related Transactions 

The equipment finance transaction is often part of a much broader finance strategy and as such, an equipment finance lawyer is involved in the following types of transactions as well as classic traditional loans and lease documentation:

1. Syndications
2. Securitizations
3. Concurrent Leases
4. Wholesale Finance
5. Portfolio and Asset Sales
6. Lending to Finance Companies
7. Program and Remarketing Agreements

 Skills

Equipment finance lawyers need to be well-versed in a number of areas of law including:

1. Personal property security
2. Insolvency and bankruptcy
3. Tax law (both commodity and cross-border)
4. Regulations relevant to finance and lease transactions, and the financiers who participate (including anti-money laundering)
5. Regulations relevant to consumer, privacy and similar
6. Inter-lender legal relationships and rights
7. Law supporting the concepts necessary for securitization
8. Accounting and financial concepts required for structuring and covenant setting