79 Percent of Private Firms Relied on Financing Equipment

Nov. 5, 2019

Financing of equipment and software continues strong, according to a recent report from the Equipment Leasing & Finance Foundation. The majority of businesses (79 percent) relied on financing for at least part of their equipment and software acquisitions last year amid a decline in the propensity to finance equipment investment, according to the new study, 2019 Equipment Leasing & Finance Industry Horizon Report.

The Foundation cites additional cash on hand and higher interest rates as drivers for the decline among private businesses.

The report provides the data to estimate the current size of the equipment finance industry, assess the propensity to finance private sector equipment investment for key equipment verticals, and forecast end-user plans to acquire and finance equipment over the next 12 months, according to the Foundation.

“The Horizon Report shows that while more businesses than ever are using financing, they aren’t financing as much of their acquisitions as they have in the past,” said Jeffry D. Elliott, Foundation chair, in a prepared statement.

Key Horizon findings

Leasing remains the most used method of finance. According to the end-user survey (which focused only on private sector investment), the most common financing method used by businesses to acquire equipment and software in 2018 was leasing (24 percent), followed by lines of credit (16 percent), and secured loans (12 percent).

Share of businesses using financing reaches new high. The end-user survey result showing that 79 percent of respondents used at least one form of financing to acquire equipment in 2018 is a substantial increase from the previous year’s result of 58 percent, and a return to levels observed in 2015 (78 percent) and 2011 (72 percent).

Equipment and software investment to remain steady. The majority of survey respondents expect the volume of their equipment and software acquisitions to remain the same over the next 12 months (56 percent), and the share of end-users who expect volume to increase (22 percent) roughly matches the share who expect it to decrease (21 percent). Of those who expect acquisitions to increase, the majority (59 percent) expect to use a financing method to cover at least a portion of the cost.

Source: Equipment Leasing & Finance Foundation