Equipment Financing Pricing

As your small business considers the decision on whether or not to go the business equipment financing route, it is advisable to look at the available research on this market to see if it will assist your company.

According to a 2011 Survey of Equipment Finance Activity (SEFA) released through the Equipment Leasing and Finance Association (ELFA), the business equipment financing industry started to reclaim volume last year.
The survey indicated an overall increase of nearly 4.0% in volume in 2010, compared to a major 30.3% decline in the prior year and a 2.2% drop in 2008.
According to William Sutton, ELFA president and CEO, “Through 2010, the equipment finance industry showed gradual but steady growth. Although uncertainty about the broader economy continues, more recent data collected in the first two quarters of 2011 suggests the trend toward an improved equipment finance industry is continuing.”
According to the numbers:
  • Captive equipment finance organizations witnessed the greatest increase in new business volume (11.3%). Independents witnessed their volume grow some 5.2%, changing a major 46.3% drop in volume noted in the 2010 SEFA. Meantime, banks saw a small decline (0.9%) in volume;
  • As for assets, agriculture, trucks and trailers, and medical imaging/electronic devices witnessed gains in new business volume, while construction, energy and printing saw drops. The categories witnessing the largest increase in new business volume were state and local government; mining/oil and gas extraction; federal government; agriculture, forestry and fishing; and arts/entertainment recreation;
  • Pre-tax income and net income witnessed healthy increases, though revenues fell a bit in dollar terms by 0.5%. Pre-tax income got to 29.2% of adjusted revenue and net income was 21% of adjusted revenues;
  • Both ROA and ROE saw increases. Financial measures like return on average assets (ROA) came back to levels last witnessed five years ago, while return on average equity (ROE) saw a major increase to 22.1%.

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