What Segments of Equipment Leasing Have the Most Optomistic Outlook?

According to ELT Magazine there is considerable improvement in the industry overall from last year.  According to a recent study done by the ELFA the industry is returning to prerecession levels and a greater volume of equipment is expected to be leased in 2011.  So what industries are leading the comeback?  Here they are ranked from highest-rated to lowest-rated.
Medical
Oil/gas/energy
Machine tools
Truck/Trailers
Hi-Tech/Computers
Aircraft
Rail
Container
Construction
Telecom
Marine/Intercoastal
Automobiles
Plastic
FF&E
Printing

Medical Equipment has been leader of the pack when it comes to growth the last 6 years.  With the rising demand it is expected to be a 57 Billion dollar industry by 2017.  The medical industry's preference for leased equipment is fueled by the "baby-boomer" generation.  There are some challenges facing health care growth including the "reform" proposals, various potential reimbursement cuts, rules and other things aimed at the industry.  All of these factors make used equipment more and more attractive.

Oil/Gas/Energy markets are improving, due impart to optimism and opportunities for "clean energy" technology and equipment.  There is also a drilling boom in natural gas and oil that has given solid increased value to drilling rigs.

Machine Tools are up thanks to the turnaround in the domestic and international manufacturing sectors.  This market has seen an 85% growth, which is linked to the financing of smaller ticket sizes and one-off deals.  The secondary market demand for machine tools has also played a part in the growth of this sector.

Trucks/Trailers experienced  the greatest overall improvement from last year.  Both new and used trailers increased as the freight tonnage index steadily improves month over month.

Hi-Tech/Computers showed a small decline, but demand continues to grow.   The industry has low margins and demand for upgrades that were put off the past few years will begin to catch up and add to growth.

Aircraft has shown some growth in the commercial structure and the private sector demand is on the rise, particularly the business jet segment.  We will keep our eyes on this industry and measure the effects of the rising price of fuel and effects it will generate.

Rail is still soft, but the demand for over 300,000+ rail cars is creating some buzz.  This market should see a steady and consistent turnaround.

Containers seem to be experiencing tremendous growth as production volume has increased by 10 times over. Conditions for growth are strong and will remain so for the future.

Construction seems to be in a constant battle with the market.  The segment is still soft, although many resellers are experiencing shortage in used equipment.  New equipment is still slow and has seen a decline over the past two years.  The opportunity to buy low and sell high presents itself for the future.

Telecom equipment is turning the corner as demand expands.  With the increase of broadband capacity related to video and data transfer the industry is ramping up.  Long term evolution to accommodate 4G mobile phones will keep growth steady.

Marine/Intercoastal saw declines due mainly in part to supply and demand issues.  The container shipping segment is rapidly outpacing with deliveries of new container ships.

For more information on industry outlooks visit http://www.elfaonline.org/

Medical Equipment Rental to Reach $56B by 2017

Global Industry Analysts announced the release of its report on medical equipment and leasing and predicts the global market will reach $56 billion by 2017. Major factors propelling market growth include growing incidence of chronic diseases, driving the demand for diagnosis and in turn the need for medical equipment; technological advancements leading to the obsolescence of old equipment; surging prices of medical equipment; and the need to curb healthcare expenses. Healthcare service and equipment providers are increasingly turning to leasing as an economical option for acquiring costly medical equipment and devices.
The report notes rental and leasing of medical devices is fast catching up in the healthcare sector, repelling the traditional loan and credit purchase system. Rental and leasing of medical equipment is an affordable and quick solution for hospitals, nursing homes, and physicians constrained by limited funds due to the recent global economic recession. Leasing enables saving working capital, gives option for purchasing the equipment, and allows upgrades to new technology. Commonly leased medical equipment includes X-ray machines, ultrasound systems, patient-monitoring equipment and laboratory equipment.
Leasing is growing as the most preferred alternative method for financing medical technology in countries such as France, Germany and the U.K. due to the budgetary constraints faced by most of the hospitals in Europe. The German medical equipment market is the largest in the European region. The U.S. represents the next important market for medical equipment, trailing behind the Europe. However, growth is expected from the rest of the world market, which is forecast to exhibit the fastest compounded annual growth of more than 7.0% during the analysis period.
The penetration of medical equipment lease financing in the U.S. has been relatively low until about five years ago, owing to the lack of awareness about leasing, reduction in reimbursements and regulations influencing physician referrals. However, the scenario has changed in recent years, with currently about 35% to 40% of medical equipment in the U.S. being leased.

Top Equipment Leasing Industries of 2011

ELFA Survey: ‘What’s Hot, What’s Not’ in 15 Equipment Leasing, Finance Industries

The medical equipment, oil/gas/energy and machine segments of the equipment finance industry have the most optimistic outlook for 2011, according to a recent survey of asset managers and consultants by the Independent Equipment Company in cooperation with the Equipment Leasing and Finance Association.
The results of the 2011 “What’s Hot/What’s Not” Equipment Leasing Trends Survey, to be released at the ELFA Equipment Management Conference in St. Petersburg, Fla., reveal that industry perceptions of 15 equipment markets are split, but show considerable improvement over 2010. The results indicate the industry is returning to pre-recession levels and a greater volume of equipment is expected to be leased in 2011 than in 2010.
Survey respondents ranked 15 equipment types as follows, in order from highest-rated to lowest-rated:
1. Medical equipment
2. Oil/gas/energy
3. Machine tools
4. Truck/trailer
5. Hi-tech/computers
6. Aircraft
7. Rail
8. Containers/chassis
9. Construction
10. Telecom
11. Marine/Intercoastal
12. Automobiles
13. Plastic
14. Furniture/fixtures/equipment
15. Printing
The full report and survey methodology are available on the ELFA website at http://www.elfaonline.org/ind/topics/AssetMgmt/.
The 2011 “What’s Hot/What’s Not” Equipment Leasing Trends Survey was conducted in January and February 2011. A total of 155 industry professionals responded to the six-question online survey, of which 93 percent were lessors, asset-based lenders or financial advisors and seven percent were service providers. For more information, visit http://www.elfaonline.org/ind/topics/AssetMgmt/.
The Equipment Leasing and Finance Association is the trade association that represents companies in the $521 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. Its more than 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. In 2011, ELFA is celebrating 50 years of equipping business for success. For more information, please visit http://www.elfaonline.org/.

Stepping Inside the Shoes of Medical/Healthcare CFO's- new challenges they face with proposed accounting changes

Mazuma Capital Company offers it's employees an extensive cross training program to become familiar with all aspects of the leasing industry.  Last week we had an accounting expert come in and discuss the proposed accounting changes, and how that will impact businesses and leasing experts. As a followup to our training I reached out to professionals in industries across the board.  Below is a summary of what challenges face CFO's in the medical/health care arena. I wanted to share his insights with you on the proposed accounting changes, and how they are preparing. I think it is critical for us to be thinking outside of the box on how to approach these CFO’s by understanding their mindset.  I hope you find it helpful…

Thanks for your questions regarding the proposed accounting changes, and how they will affect medical/health care purchases going forward.  Yes we have discussed the change concerning leases and how they will all be shown as Capital leases on the Balance sheet. It is a particular concern to us and other facilities like us that have large loans on their existing property and have to maintain Debt covenants per their loan documents. For example like Debt Service Coverage and Long term debt to capitalization. This will most definitely put expansions and additions planned for facilities on hold.  Being able to maintain certain grants and financial benefits through the government come to us by keeping facilities profitable.  By adding debt to our books, we will have to re-think our strategies to maintain these benefits we currently receive.

With that said we may have to look at delaying purchase of larger capital items and end up trying to pay cash for them. Smaller Capital items we will definitely pay cash.

Remember too that we operate several hundred Critical Access Hospitals (under 25 beds) that can take advantage of being reimbursed by Medicare at cost. Prospective payment hospitals cannot take advantage of that so it may even be more difficult for larger facilities when looking to purchase larger items, such as MRI and X-Ray machines.

Those are just a few of my thoughts.  We will be interested to see what leasing companies put together as an offering for facilities like ours.  Right now we are going with cash, but if there is a product that arises, I know that CFO’s all over the country will welcome it, if it can help the balance sheet.