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Companies Bend In Favor Of Leasing And Finance Equipment To Do Away With Capital Needs

It may be stormy for the big daddy’s economy, but the United States economy is showing resilience as the leasing and equipment financing is still growing. Financing is being done for everything, from computers to tractors.

License: Creative Commons image source

License: Creative Commons image source

This is reflected in the volume generated by new businesses in June; financing and equipment leasing rose by 29 percent in May 2012. According to a report by the Equipment Leasing and Finance Association, the month has been one of the best since the recession in 2008.

IT continues to be a driver of growth

  • Of the overall leasing and commercial leasing, IT related products like software and computing equipment comprises of the largest chunk.
  • This segment almost has a share of 22 % of the new business whereas transportation accounted for the maximum share.
  • The 2012 Survey of Equipment finance by the Association estimated that the growth in IT related financing was 10.9% over previous year.
  • According to Bill Choi, VP of research and industry services at the association, it is said to be the best time for companies to avail capital financing due to easy financing and high returns.
  • Vice President of IDC Joseph Pucciarelli opines that a lot of companies are using financing and leasing options to save capital.
  • The company expects that the market for financing and leasing IT equipment in the current year may reach $67.3 billion vis-à-vis $64.7 billion in previous year. In fact, the boom is expected to continue as IDC estimates that the market may reach $77.4 billion.
  • In April 2009, the market plummeted to an all time low for the financing commercial equipment leasing business.  It resulted in a decline of 42.5% in the new business volume in comparison to the same month in previous year.
  • On the other hand, financing and leasing for IT equipment showed a decline of about 10%.  This reflects how companies are viewing software and computing equipment as a strategic part of their businesses.
  • In IT finance, the rapidly growing segments are storage, point of sale, software and banking systems according to a report released by the Association.

Overall scenario – Why businesses are utilizing it?

  • Firms are seeking help of business equipment leasing in order to improve the efficacy of their cash flows.
  • Even though in the initial stage, it was only used for financing motor vehicles, this has changed over the years and a wide range of companies, whether in public or private sector, are now making use of this product.
  • The industry has become irrelevant and anything from laptops to coffee machines is using this facility.
  • The vital thing is that since these are just used for business purposes, 100 % tax deduction is allowed on rental payments.

Conclusion:

Even the construction industry has adapted to this easily and businesses which entail heavy machinery and special tools for operating their businesses are using this facility. Even though there was a partial drop during recession, it has picked up very well and now construction is one of the best industries utilizing the leasing equipment facility.

About the Author: Jim Thomas is the author of this post and a business analyst providing various business cash advance options for building a successful business.