Thank you, Mr. Chairman, and thank you for this opportunity to meet with the committee.
We've titled our submission to the committee “Getting Credit to Main Street Canada for SMEs and Consumers”.
The Canadian Finance and Leasing Association strongly supports the government's goal to restore liquidity and stability to the financial system while minimizing any potential long-term negative impact on taxpayers.
We are here today to strongly endorse the creation of the Canadian secured credit facility with an allocation of up to $12 billion to purchase term asset-backed securities, backed by loans and leases on vehicles and equipment.
For us, the Canadian Secured Credit Facility represents very positive commitments being made by the federal government, a significant and innovative step towards kick-starting funding for loans and long-term leasing of vehicles and equipment.
This initiative is a win-win situation for both small and medium businesses and the consumer, as well as a short-term, low risk and profitable investment for the government. The spinoff will be significant. We should expect consumers and SMEs to receive credit which will contribute to restoring the confidence of private investors in the commercial sector.
The members of the Canadian Finance and Leasing Association are the largest providers of debt financing in Canada after the traditional lenders, the banks and credit unions. As of December 31, 2007, the industry's portfolio of assets financed was estimated to be worth $112 billion.
Most of the financing industry's clients who rely on assets and long-term leasing are small and medium-sized businesses and consumers.
In the five minutes allotted to my opening remarks I want to offer a few key points.
First, all this industry does is finance the acquisition of equipment, machinery, and vehicles by business and consumer customers. All the capital obtained by the industry is deployed to carry out that single mandate. Any liquidity injected into this sector will directly, quickly, efficiently, and effectively reach the general marketplace.
The industry does not borrow excessively, and does not accumulate capital. Capital must be used. As such, each dollar of liquidity injected into this sector shall be used in the economy directly, rapidly, efficiently, and effectively.
Second, the assets financed by this industry are straightforward: equipment and vehicle loans and leases. Customer credit generally has not experienced problems associated with poor underwriting standards. Industry receivables continue to perform within the normal levels that can be expected in an economic downturn and well within anticipated tolerances.
Assets financed by this industry are straightforward: they are loans and long-term leasing of equipment and vehicles. These assets are generally necessary to meet the basic needs of our clients: essential equipment for business operations or a car needed to travel.
Third, this industry supports a broad network of dealers, manufacturers, distributors, vendors and brokers and their customers in hundreds of communities across Canada. Equipment financing companies have relationships with manufacturers, vendors, and distributors of all sizes to provide financing to their customers to acquire machinery and equipment.
The automobile manufacturing sector's financial affiliates finance dealerships, and the clients of dealerships who are seeking to acquire a vehicle. For those clients, longer-term lessors of commercial fleets use the automobile dealership network to acquire, maintain and dispose of vehicles in all the provinces.
Fourth, funding, which is fundamental to the credit cycle provided by our members, has just stopped. Despite having been prudent in credit extension, this industry is suffering from the effects of the freeze in credit and liquidity. Very few private funders remain active in this marketplace.
Fifth, the Canadian Secured Credit Facility is an investment being made by government. The taxpayer will draw the same benefits, and receive the same protection that any private investor would have received.
Sixth, we do not expect the government to have any long-term role in funding the industry.
The goal is to restore the confidence of private investors so that they restore financing for these transactions.
I would be very pleased to answer your questions.