| Connect:
Groundbreaking Study Finds Equipment Finance Market Reaches $600 Billion!
Posted 12/18/07
"Publication of this seminal study provides hard evidence that the equipment finance sector is a significant contributor to capital formation in the U.S. economy," said Foundation Executive Director, Lisa Levine. "Just as important, the data further illustrates what U.S. businesses already know -- equipment finance provides the means by which they are able to acquire productive assets efficiently and affordably," Levine said.
“Every year American businesses, nonprofits and government agencies invest in excess of $1 trillion in plant and equipment (including software/excluding real estate) and 55 percent or $600 billion of that investment is financed,” said Kenneth E. Bentsen, Jr., ELFA president. “Businesses and other entities cannot operate without plant and equipment and equipment finance is more than a financing mechanism for the acquisition and utilization of capital goods, it’s really capital formation.” Bentsen said.
According to the U.S. Equipment Finance Market Study:
- Of the $1 trillion in fixed business investment or CapEx estimated for 2006 by the U.S. Department of Commerce, at least 55 percent or $600 billion is financed through various forms to acquire all kinds of plant, equipment and software.
- Equipment finance includes loans, leases, and lines of credit secured by plant or equipment assets.
- Examples of equipment financed includes commercial and corporate aircraft; rail cars and rolling stock; trucks and transportation equipment; business, retail and office equipment; manufacturing and mining machinery and equipment; IT equipment and software; vessels and containers; construction and off-road equipment; medial technology and equipment; rigs and drilling equipment; and plant and production facilities.
- Investment in plant and equipment utilization is primary to business operations and directly impacts the commercial economy. Financing of such activity is a form of capital formation.
- The commercial equipment finance sector contributes to capital formation in the U.S. and abroad and plays a vital role in supporting the continued expansion of the U.S. economy by facilitating capital investment.
- The equipment finance sector provides a barometer of the commercial economy, be it trends in Cap Ex investment, credit availability, credit quality or asset values. ELFA issues monthly economic and other research (including the MLFI-25 which tracks new business volume; aging receivables; charge-offs; credit approval and headcount).
“The commercial equipment finance sector provides companies with access to capital and finances economic growth through capital investment thereby enhancing business investment and capital formation,” said Bentsen. “That businesses rely on financing such a large portion of capital investment underscores the sector’s impact on the volume of investment in capital goods.”
The U.S. Equipment Finance Market Study is available at no cost in the Foundation’s Library.
