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Independent, non-profit Foundation studying markets, trends and operations to illuminate the future of the equipment finance industry.

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Bundled Solutions - Equipment Financing Without the Equipment

Executive Summary

Despite the challenging global economic and credit environment, experience shows there are always areas of opportunity for the equipment finance industry. One such area is Bundled Solutions Financing. Even though technology traditionally represents one of the most penetrated areas for equipment finance, the 2008 ELFA Survey of Equipment Finance Activity indicates the Industry is not taking full advantage of one of its fastest growing segments. As aptly put by one leasing executive, "… the leasing industry has not yet captured the majority of the possible financing opportunity represented by Bundled Solutions Financing… How do we pick up this additional volume and therefore help generate further cash flow for ourselves?"

By detailing the strategic advantages and performance risks for all major parties to a bundled transaction this study provides tools to assist lessors in answering that question. Identification and implementation of market-tested best practices are highlighted, along with learnings from those lessors that have emerged as leaders in this product. Differences in approach are reviewed for the three major types of leasing organizations: independents, banks, and captives. The major issues faced by the Industry in expanding the use of Bundled Solutions Financing are identified and explored:

Accelerating trends in technology causing shifts in end-user buying behavior from point products to solutions, and in vendor profit migration to software and services

Bundling's future as a significant procurement option for U.S. technology buyers

Bundling's potentially game-changing - possibly revolutionary - impact on the Industry

The information in this study is intended to inform long-term strategic decisions including:

  • Seeking out emerging opportunities in new technological approaches;
  • Anticipating the emerging threats of managed services and on-demand outsourcing;
  • Understanding risk/reward trade-offs, especially given the increasing complexity of BSF;
  • Assessing strategic opportunities to partner with other transaction participants to leverage respective competitive strengths (e.g., technology,
  • financing and vendor management);
  • Planning and executing an action plan to implement and/or expand the use of BSF to meet increasing customer demand;
  • Increasing confidence in the practice of bundling, especially given its long-time popularity, sophisticated evolution, and widespread use by the Industry;
  • Using BSF as a competitive advantage, built upon a foundation of bringing innovation directly to the customer;
  • Understanding future trends in BSF to take advantage of new opportunities - and manage their associated risks - as the product continues to adapt to market forces.

Additionally, this study encourages Industry participants to investigate the following areas for additional product development:

  • Application to other market segments, such as health services, where demographics are driving increased customer demand;
  • Leveraging the product in overseas markets, understanding how the product differs from implementations in the U.S. market;
  • Adapting to technology's transition to an on-demand access and use model.

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