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Propensity to Finance (2007-2008)
Study Objectives
- Analyze the propensity of businesses to finance equipment purchases
- Conduct primary research on businesses to determine utilization of alternative methods of equipment financing
- Identify key factors that influence equipment financing
- Estimate the volume of equipment financing by combining primary research with
- Global Insight's proprietary investment spending databases
Key Findings
- The equipment finance volume for 2006 is nearly $600 billion. Equipment financing represents 55% of the total U.S. equipment investment in 2006. [1]
- Small firms (51 to 100 employees) and medium-sized firms (101 to 1,000 employees) utilize equipment finance for 74.1% and 73.3% of their purchases, respectively.
- The larger the ticket size, the more likely that the equipment will be financed. Equipment priced at $5 million or more has over twice the financing share of items priced less than $25,000, (71% versus 32%).
- The share of firms utilizing equipment finance for their purchases drops off sharply when annual sales are less than $1 million.
- Businesses with high profits relative to sales are more likely to use equipment finance for their purchases.
- Optimization of cash flow and tax advantages are the top reasons for financing equipment purchases.
- Lenders/lessors have the ability to target specific segments by firm size, equipment type, ticket-size, and industry to optimize account acquisition strategy.
Equipment Types Included in Study
- Communication Equipment
- Computer Equipment
- Agricultural Equipment
- Construction Machinery
- Other Machinery
- Furniture & Fixtures
- Medical Instruments
- Office Machines
- Software
- Trucks & Trailers
- Aircraft
- Other Transportation (autos, buses, railroad & water transport.)
Table of Contents:
- 5 Key Findings
- 7 Methodology Overview
- 13 Financing Methods
- by size of firm
- by equipment type vs. total US investment
- by Size of Purchase
- by Industry
- 22 Propensity to Finance
- by industry
- by firm size
- Financing frequency vs Firm Growth in Sales
- Financing Frequency vs. Firm Profitability
- Reasons for financing purchases
- Reason for Financing by Equipment Type
- Reason for Financing by Size of Purchase
- Reason for Financing by Industry Group
- Reason for Financing by Size of Firm
- Penetration Rates
- 30 Business Application
- 37 Implications
- 38 About the Research Firm
