Association studies state of equipment finance industry.

Press Release Summary:



Equipment Leasing and Finance Foundation commissioned Financial Institutions Consulting, Inc. to evaluate current trends and their potential impact on equipment finance industry to help provide focus for future based on industry and global economic data and industry executive interviews. Study includes quantification of size and scope of equipment finance industry, identification of opportunities in marketplace, and short-term projections for equipment finance industry.



Original Press Release:



2008 State of the Equipment Finance Industry Fact Sheet



Study Objectives

The Equipment Leasing & Finance Foundation commissioned Financial Institutions Consulting, Inc. to evaluate current trends, their potential impact on the equipment finance industry and to help provide focus for the future of the industry based on industry and global economic data and industry executive interviews. The study includes:

o Quantification of the size and scope of the equipment finance industry

o Identification of opportunities in the marketplace

o Provide insight to the current state of the industry and short-terms projections for equipment finance industry

Study Methodology

o Financial Institutions Consulting, Inc. methodology for this analysis incorporates statistical data, past client experience and in-depth industry executive interviews. Results from the Equipment Leasing and Finance Association (ELFA) annual Survey of Equipment Finance Activity (SEFA) was also used and reflects the fiscal year-end 2007 performance.

Key Industry Facts

American businesses, nonprofits and government agencies spend in excess of $1 trillion in capital goods or fixed business investment (including software/excluding real estate). We know that:

Equipment finance includes loans, leases, and lines of credit secured by plant or equipment assets

Examples of equipment financed includes commercial and corporate aircraft; rail cars and rolling stock; trucks and transportation equipment; business, retail and office equipment; manufacturing and mining machinery and equipment; IT equipment and software; vessels and containers; construction and off-road equipment; medial technology and equipment; rigs and drilling equipment; and plant and production facilities

Investment in plant and equipment utilization are primary to business operations and directly impact the commercial economy. Financing of such activity is a form of capital formation

The commercial equipment finance sector contributes to capital formation in the U.S. and abroad and plays a vital role in supporting the continued expansion of the U.S. economy by facilitating the exchange of capital for purposes of equipment investment.

The equipment finance sector provides a barometer of the commercial economy, be it trends in Cap Ex investment, credit availability, credit quality or asset values. ELFA issues monthly economic and other research to back this up (the MLFI-25 which tracks new business volume; aging receivables; charge-offs; credit approval and headcount).

Key Study Findings

o The current state of the equipment finance market is generally good, with slight volume growth.

o In times of economic uncertainty, companies rely on financing, particularly leasing, to preserve cash and enhance cash flow.

o For 2008, Global Insight, Inc. forecasts the total investment in equipment and software will exceed $1.15 trillion, a 2.3 percent increase over 2007. GI estimates end-users will finance approximately 57 percent of their equipment investment or about $652 billion, a 1.6 percent increase over 2007.

o In 2009, Global Insight projects that end-users will finance approximately $672 billion of their nearly $1.19 trillion of equipment t and software investment. It is expected that 57 percent of end-users will finance their equipment investment.

o Return to more traditional leasing products is anticipated as customers try to preserve cash and lower monthly payments in light of economic uncertainty.

o Those equipment financing companies able to fund through bank deposit will have a significant competitive advantage.

o Delinquencies and charge-offs remain the same as year-end 2007, even as the market softens. However, executives are increasing their reserve losses in anticipation of greater delinquencies and losses.

o Executives are evaluating their portfolios and are increasing their underwriting requirements and reducing their exposure in certain industries.

o Those with significant capital have an opportunity to leverage increasing margins along with current efficiency to generate significant profits.

o Energy, alternative energy and corporate aircraft markets are expect to outperform the industry through 2009.

The Equipment Leasing & Finance Foundation is the only nonprofit organization dedicated to providing future-oriented research about the equipment leasing and finance industry.

The Equipment Leasing and Finance Association is the trade association that represents companies in the $650 billion equipment finance sector which includes financial services companies and manufacturers engaged in financing the utilization and investment of and in capital goods.

Financial Institutions Consulting, Inc., (FIC) is a management consulting firm that focuses on developing fact-based strategic and tactical solutions for its clients. Its work centers on issues related to increasing growth and productivity. It possesses extensive experience with commercial finance and leasing clients as well as the middle market and small business segments. In addition to its U.S.-based work, FIC has completed engagements in over 20 countries around the world.

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