Flexibility Is Key as Canadian Businesses Rethink Financing

With available credit shrinking amid economic turbulence, Canadian finance leaders have concerns beyond just securing capital

By Michael Fox, Vice President, International Business Development, Mitsubishi HC Capital Canada

For most of the past decade, equipment financing decisions were relatively straightforward because interest rates were low and credit was abundant. Many organizations focused primarily on securing the cheapest available capital. But the good times were bound to end at some point, and today we look out on a much more cautious credit environment.

Canadian businesses are now navigating tighter, higher borrowing costs compared with historic lows in the recent past, and ongoing uncertainty around tariffs and inflation combine with sector-specific volatility to create challenges in equipment acquisition. Unsurprisingly, finance leaders are reassessing how they approach their business, placing a priority on preserving working capital while maintaining operational capability. Instead of focusing only on whether capital is available, finance leaders are asking how to structure financing so they maintain flexibility if conditions change.

Structure v. Rate
Even under the best conditions, it would be a mistake for a company to focus exclusively on interest rate when evaluating financing options. Today that’s doubly true. Rate is important, but it’s only one piece of the equation. In 2026, the structure of a financing arrangement can have a far greater impact on financial flexibility. Wise CFOs are paying closer attention to other factors, such as down payment requirements, length of financing terms, end-of-term options, residual values, payment schedules and cash flow impact.

A structure that aligns payments with operational cash flow or that offers multiple end-of-term options can provide significantly more flexibility than a slightly lower rate.

Leasing and Flexible Models Gain Traction
Another trend I see gaining momentum is a shift in how companies think about equipment ownership. In the past, many organizations assumed they needed to own their equipment outright. Today, more businesses are evaluating leasing and rental models that allow them to access equipment without committing large amounts of capital. Some equipment dealerships have even expanded rental offerings because customers want to avoid long-term commitments until the economy calms down.

Operating leases, fair market value structures, and emerging equipment-as-a-service models can help organizations maintain operational capability while preserving liquidity. I would encourage CFOs facing tighter capital budgets to explore these options for the relatively high degree of flexibility they offer.

Expanding Beyond Traditional Bank Financing
Banks remain an essential part of most companies’ financing strategies. But many organizations are increasingly exploring alternatives beyond their primary banking relationships. Specialized equipment finance providers often offer structures that traditional lenders may not provide, including flexible payment schedules, lifecycle financing programs, and operating lease structures.

These providers may also help businesses unlock capital from existing assets. For example, a company that owns equipment outright may be able to refinance those assets, raising working capital while continuing to use the equipment in operations. Again, for companies operating in a tighter credit environment, these types of solutions can provide the ability to adapt to volatility.

Questions CFOs Should Ask Financing Partners
Finance leaders should be deliberate (this has always been true, but it’s especially important now) in their evaluations, and broaden the conversation with potential partners well beyond rate discussions. What financing structures are available? You need to gather all information necessary to understand the options around down payments, terms, and residual values. Are there flexible payment options? Deferred or delayed payment schedules can help align financing with operational cash flow. What are the end-of-term options? Knowing whether equipment can be returned, refinanced, upgraded, or purchased outright can influence your long-term strategy.

In addition, ask whether used equipment can be financed. Acquiring pre-owned equipment can be an effective way to reduce capital requirements while still supporting your immediate needs. And are there trade-in or asset monetization options?

Programs that allow companies to trade in or refinance existing equipment can help fund upgrades without major new capital commitments.

Finally, CFOs should also consider the stability and long-term reliability of their financing partners, which becomes especially important in harsh economic conditions.

Be Smart, Be Agile
Tariffs and geopolitical developments are also affecting equipment financing decisions, temporarily inflating equipment prices, which creates the risk that assets financed at higher values could later decline in price if trade policies change. That dynamic makes flexibility in financing structures even more important for both lenders and borrowers.

Ultimately, as I see it, the biggest change in today’s market is a shift of perspective. I see successful Canadian businesses moving away from the idea that equipment financing is only about accessing capital. Instead, they are rightly making a deeply focused effort to manage cash flow, preserve working capital, and maintain operational agility. That is the best approach for all of us in the current climate.

Michael Fox is Vice President, International Business Development, Mitsubishi HC Capital Canada.