ELFF: US equipment finance market to exceed $1trn this year

The equipment finance market in the US will grow by 1.31% to $1.03trn (€920bn) in 2016, according to the Equipment Leasing & Finance Foundation.

The US Equipment Finance Market Study: 2016-2017, which was conducted by IHS Markit for the ELFF, projected that the market will reach $1.24trn in 2020.

According to the foundation, 78% of respondents financed equipment in 2015, up from 72% recorded in 2012, showing an increased propensity to finance, with larger ticket purchases financed to a greater degree than smaller ones.

The study also found that 68% of the total value of equipment and software acquired by businesses in 2015 was financed, up from the 55% forecast in 2012’s report.

The ELFF stated that the market saw a shift towards leases and unsecured loans; reporting that 39% and 13% of financed software was through these methods respectively, up from 17% and 9% in 2011.

Customers increasingly sought managed solutions or bundled services and usage-based products, according to the ELFF.

The study found that bank financing had declined in recent years, accounting for 47% of financed purchases in 2015, down 10% from 2012’s level.

According to the ELFF, banks sought to finance companies with lower risk profiles, with lending to unprofitable enterprises more than halving between 2011 and 2015, from 53% to 26%.

Cash purchases also declined according to the study, with the ELFF attributing this to low interest rates, competition among lenders, and abundant liquidity increasing the attractiveness of financing equipment acquisitions.

The growth of fintechs has, according to the ELFF, driven faster adoption of technology, and ushered in a ‘digitalisation’ era in the industry’s lending process.

The ELFF states that industry experts doubted that lease accounting changes would severely impact demand for leasing once they come into effect in December 2018, arguing that years of discussions had allowed firms to be prepared.