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Equipment Leasing and Finance Association Announces Top 10 Equipment Acquisition Trends for 2019

ELFA Forecasts Generally Positive Economy and Solid Capital Investment with Building Headwinds and Moderated Growth by Year End

 The Equipment Leasing and Finance Association (ELFA) which represents the $1 trillion equipment finance sector, today revealed its Top 10 Equipment Acquisition Trends for 2019. Given U.S. businesses, nonprofits and government agencies will spend over $1.8 trillion in capital goods or fixed business investment (including software) this year, financing a majority of those assets, these trends impact a significant portion of the U.S. economy.

ELFA President and CEO Ralph Petta said, “Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors. Equipment leasing and financing provide the source of funding for approximately 60 percent of U.S. businesses to acquire the productive assets they need to operate and grow. We are pleased to again provide the Top 10 Equipment Acquisition Trends to assist businesses with understanding the market environment and making their strategic equipment acquisition plans.”

ELFA distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2019 Equipment Leasing & Finance U.S. Economic Outlook, industry participants’ expertise and member input from ELFA meetings and conferences in compiling the trends.

ELFA forecasts the following Top 10 Equipment Acquisition Trends for 2019:

1.   Capital spending will remain in solidly positive territory. The first half of 2018 saw strong growth in equipment and software investment, driven by a healthy U.S. economy and more preferable tax treatment. Growth slowed in the second half of the year, providing a less robust jumping off point for 2019. After 7.9 percent growth in equipment and software investment last year, look for still healthy, though more moderate, 4.1 percent growth in 2019.
2.   The share of equipment acquisitions that are financed will likely remain stable.  Equipment leasing and finance will remain the most common payment method used by businesses to acquire equipment and software. The propensity of businesses to finance will continue despite rising interest rates, lower tax rates and a strong economy that’s resulted in many companies with cash on hand.
3.   A majority of key equipment verticals will have solid investment growth. Through the first half of 2019, many equipment verticals will build on or hold steady with the previous year’s positive investment gains, including aircraft, construction, computers, software, materials handling, and ships and boats. Equipment types likely to peak include agriculture, trucking, and medical equipment. Investment growth in some verticals may weaken this year as the business cycle matures further.
4.   U.S. businesses will feel the impact of global economic headwinds. U.S. firms will find conditions in international markets increasingly factoring into their own business decision-making in 2019. Slowdowns in China, in particular, Europe and other major emerging markets; the conflict in U.S.-China trade policy; and global credit tightening will be among the global effects that will drag on the U.S. economy and capital spending decisions.
5.   Leased and financed acquisitions will get a boost from regulatory and legislative changes. The combined impacts of changes in lease accounting standard ASC 842 and the new federal tax law have provisions that maintain, and in some cases improve on, previous benefits of financing, such as 100 percent bonus depreciation and expensing of used and new equipment. More precise balance sheet calculations for rating agencies lower capitalized asset costs vs. loan or cash purchase, and higher deductibility of interest expense are just a few of the new advantages.
6.   Technological advancements and avoiding obsolescence will be top priorities of capital spending. Equipment finance businesses across all industries will seek out new technologies for everything from enhancing the end-user experience to increase efficiencies to managing obsolescence. The ability of these organizations to successfully implement technologies like blockchain, artificial intelligence and robotics will continue to differentiate market leaders from also-rans.
7.   Innovations in equipment management will accelerate to meet the growing complexity of setting residual values. Faced with the globalization of markets and rapid technological developments that shorten industry cycles and rapidly shift asset values, equipment managers will deploy robust technology platforms and data analytics in combination with their industry expertise to provide residual values. End-users acquiring new and used equipment will benefit from stiff competition and enhanced customer service capabilities.
8.   Uncertainty around interest rate hikes will have eyes on Fed activity. Downgraded expectations from as many as five interest rate increases to two in 2019 will impact both equipment suppliers and end-users that seek funding. A softening global economy could further delay planned hikes. Regardless, businesses will stay tuned so they can plan accordingly.
9.   Federal government activity will pose opportunities and challenges to capital spending. As businesses continue to realize the benefits of federal deregulation, the results of how a divided Congress acts could dampen momentum. Political brinksmanship and dysfunction could make collaboration on legislation more challenging. Bipartisan cooperation could support a long-awaited infrastructure spending bill, but proposed legislation this year is still an unknown.
10.   External “wild cards” will factor into capital spending decisions. While the outlook for capital spending remains generally positive, there are additional areas businesses will keep an eye on for the potential to impact their equipment acquisition strategies. Modest to moderate growth forecast for business investment could decelerate if trade tensions and tightening credit conditions continue to erode business confidence. The oil sector has exposure to uncertainty resulting from numerous factors, including falling oil prices, surging U.S. production, and a cooling global economy. The weak housing sector shows no clear indications of a rebound as headwinds inhibiting growth remain. Finally, global developments including Brexit terms or the deteriorating economies of some of our trading partners could impact growth in equipment investment in the U.S.

For a video and an infographic highlighting the Top 10 Equipment Acquisition Trends for 2019, go to www.EquipmentFinanceAdvantage.org/rsrcs/articles/10trends.cfm.

More Information
ELFA has an informational website for businesses that want to learn more about how they can incorporate equipment financing into their business strategies. For resources about equipment financing, including a digital toolkit, videos, and infographics, go to www.EquipmentFinanceAdvantage.org.

For forecast data regarding equipment investment and capital spending in the United States, see the Equipment Leasing & Finance Foundation’s 2019 Equipment Leasing & Finance U.S. Economic Outlook at www.leasefoundation.org/industry-resources/u-s-economic-outlook/.

About ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $1 trillion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 575 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, please visit www.elfaonline.org.

Five Factors to Consider for Small Businesses Seeking Equipment

Five Factors

ELFA Highlights 5 Factors to Consider For Small Businesses Seeking Equipment

UnknownDuring National Small Business Week, May 4–8, the Equipment Leasing and Finance Association (ELFA) is reminding small businesses of five key factors to consider when acquiring equipment. Most small businesses need equipment in order to operate and grow, and each business must decide on an acquisition strategy that is right for them. A majority of businesses turn to equipment leasing and financing so they can take advantage of a range of benefits.

“Equipment leasing and financing help all types and sizes of commercial businesses to acquire the equipment they need to conduct their business operations,” said William G. Sutton, CAE, ELFA President and CEO. “For small businesses in particular, which may not have access to many funding options, equipment financing offers flexible, budget-friendly options that can help with cash flow and keep their equipment up to date.”

ELFA highlights five key benefits that make equipment finance an advantageous option for small businesses:

  1. Get 100 percent financing with no down payment – Unlike with most traditional lenders, it is possible to arrange 100 percent financing of equipment with no down payment. This is a critical benefit, since cash flow is often a concern for small and new businesses. This allows the business to hold on to cash, or working capital, and use it for other areas of the business, such as expansion, improvements, marketing or R&D.
  2. Eliminate the risk of ownership – A business just starting out can use equipment financing to help lessen the uncertainty of investing in a capital asset until it achieves a desired return, increases efficiency, saves costs or meets other business objectives.
  3. Keep up-to-date with new technology – To be on the cutting edge and be competitive, businesses often need access to new technology. Leasing, loans and other financing can enable small businesses to acquire more and better equipment than they could have without financing. In addition, businesses that use lease financing can avoid the risk of owning obsolete equipment, since many agreements allow for easy and fast equipment updates.
  4. Plan expenses for cash flow and business cycle fluctuations – Financing equipment allows for greater certainty in budgeting by setting customized rent payments to match cash flow and even seasonal cash flows.
  5. Obtain the convenience of product and service bundling – Certain financial products allow businesses to finance the entire cost of equipment, including installation, up-front maintenance, training and software charges, thereby packaging systems and ancillary products and services into a single solution. This makes the equipment acquisition easy to manage and frees up the business to focus on its core operations.

For more information about how equipment finance equips business for success, visit www.EquipmentFinanceAdvantage.org. This site includes a digital toolkit, articles, informational videos, definitions of the various types of financing, a lease vs. loan comparison and questions to ask when financing equipment.

About ELFA

The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $903 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 580 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service

ABC and ELFA 2015 Industry Projections

ABC ELFA

Equipment Leasing and Finance Association’s Survey of Economic Activity: Monthly Leasing and Finance Index

UnknownNovember New Business Up 3 Percent Year-over-year, Down 13 Percent Month-to-month, Up 5 Percent Year-to-date

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $827 billion equipment finance sector, showed their overall new business volume for November was $6.6 billion, up 3 percent from new business volume in November 2012. Month-over-month, new business volume was down 13 percent from October. Year to date, cumulative new business volume increased 5 percent compared to 2012.

Receivables over 30 days were at 1.8 percent in November, up slightly from 1.5 percent in October.  Delinquencies declined from 2 percent in the same period in 2012.  Charge-offs declined to once again match the all-time low of 0.3 percent from 0.4 percent the previous month.

Credit approvals totaled 76.5 percent in November, a slight decrease from 77.6 percent the previous month.  Forty-seven percent of participating organizations reported submitting more transactions for approval during October, a level more in line with previous months’ activity after a spike to 82 percent last month.

Finally, total headcount for equipment finance companies was up 1.4 percent year over year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for December is 55.8, a decrease from the November index of 56.9, reflecting industry concerns over uncertainty regarding capital expenditures (capex) and competitive market pressures in 2014, among other issues.

ELFA President and CEO William G. Sutton, CAE, said: “Overall new business activity in the equipment finance sector continues to trend positively, despite some softness in November compared to late-summer and early-fall performance. Year-to-date volume also is encouraging as we head into the final month of the year, which is typically a strong period for the sector.  Fiscal pressures seem to be dissipating as well with the U.S. Congress agreeing on a two-year budget, which should lessen the chance of any potential government shutdown and provide a measure of comfort to U.S. businesses trying to make planning decisions for the coming year and beyond.  Credit quality continues its strong showing, notwithstanding a slight uptick in November delinquencies.”

Christopher Enbom, CEO and Chairman, Allegiant Partners Incorporated, said, “The continued growth in equipment finance from the previous year shows continued strength in the economy and in equipment spending.  The numbers are especially good considering the fact there were fewer working days in November 2013 than 2012.  We are expecting a strong 2014 in the small company segment we serve. The budget deal is increasing stability and has boosted our forecast for next year.”

About the ELFA’s MLFI-25

The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy:  equipment produced, acquired and financed.

The MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants is available below and also at http://www.elfaonline.org/Research/MLFI/

The Equipment Leasing & Finance Foundation is the non-profit affiliate to the Equipment Leasing and Finance Association, providing future-focused research to the equipment finance industry. For more information please visit the website at www.leasefoundation.org