Industry Future Council Helps Guide Equipment Financiers
Posted 03/16/09
The Industry Future Council just released its report, the 2009 Industry Future Council Report. Hosted each year by the Foundation and sponsored by International Decision Systems, this year’s IFC was comprised of 30 industry leaders who agreed to discuss the major issues before the industry and apply their best, critical thinking on trends and challenges and opportunities for the industry.
Their task was large, given the current climate. In addition to summarizing the two day discussion, the IFC report includes an outline of questions for industry members to ask themselves in order to aid in strategic planning during this uncertain time.
During its two day meeting in February, the IFC began its discussions agreeing that today’s business climate is not part of a cycle, but rather a complete paradigm shift to a new business reality. In other words, times aren’t just a changin’ - They have changed and for good.The IFC said that soon those companies with capital may see greater opportunities arise to deploy that capital more profitably and on more attractive terms than in recent history. With wider spreads and better terms, will likely come tighter underwriting standards and higher portfolio quality and risk/return ratios. Products will reflect the market changes and fair market value leases will likely increase while highly-structured transactions, especially those depending on tax and accounting complexity, will diminish. The ultimate key to survival, said the IFC, is and will be the ability to secure funding.
The Council also said there were some bright spots -- banks and deposit-gathering entities, well-funded and diversified conglomerates, and captives will likely emerge from the market “correction.” Also, while aircraft, transportation and construction are struggling, healthcare, renewable energy and commoditized intellectual property are markets that hold promise for the equipment financing industry.
But, the IFC also recognizes that psychologically the overwhelming desire to preserve cash and limit spending will remain for years to come. “Buying habits have been reformed,” said one IFC member, “and 70 percent of the economy is driven by the consumer”, who will remain cautious for a while.
The IFC also noted several indicators that would signal a turnaround, including:
- A return to normalcy, with banks resuming their traditional role in the chain of commerce
- Real job creation (not unemployment figures)
- An increase in transportation equipment
- A return of venture capital to the market
- An increase in merger and acquisition activity
In the meantime, the IFC says a new mindset must be adopted by all in the industry including a refocus on core competencies and a back-to-basics approach to risk management and underwriting; an evaluation of business relationships; development of new solutions to increase financing returns; a fresh look at how leasing and financing fits into the parent company’s operations; and new partnerships to expand resources.
The IFC urges every industry member to delve into the list of questions provided in the report, which could help companies identify signals and road signs leading them to a better future.
Donors receive the IFC report at no charge. Non-donors may purchase the report from the store for $95.
Sites of Reference:
http://www.store.leasefoundation.org/product/2009_industry_future_council_report/
http://www.leasefoundation.org/IndRsrcs/
