US survey shows new business volume growth

Growth follows two years of declines

July 14, 2011
by Purchasing b2b staff

Washington, DC: The equipment finance industry began to regain volume in 2010 following declines in new business volume in 2008 and 2009, according to the 2011 Survey of Equipment Finance Activity (SEFA) by the US-based Equipment Leasing and Finance Association. The survey reported a 3.9-percent increase in volume in 2010, compared to a 30-percent decline in 2009 and a 2.2-percent decline in 2008. The survey, based on responses from 108 ELFA member companies, covers key statistical, financial and operations information for the $521-billion equipment finance industry.

“Through 2010, the equipment finance industry showed gradual but steady growth,” said William G. Sutton, ELFA President and CEO. “Although uncertainty about the broader economy continues, more recent data collected in the first two quarters of 2011 suggests the trend toward an improved equipment finance industry is continuing.”

Survey highlights include:

  • New business volume varied by respondent. Although total new business volume increased by 3.9 percent, just under half of the survey respondents experienced an increase in volume between 2009 and 2010;
  • All market segments showed growth in volume, except for the small-ticket segment, which saw a contraction in volume;
  • Captive equipment finance organizations saw the strongest increase in new business volume (11.3 percent). Independents saw their volume grow by 5.2percent, reversing the decrease reported in the 2010 survey. Banks saw a slight decline;
  • Agriculture, trucks and trailers, and medical imaging/electronic devices saw increases in new business volume, while construction, energy and printing saw decreases. The categories with the biggest increases were federal, state and local government; mining/oil and gas extraction; agriculture; forestry and fishing and arts/entertainment/recreation;
  • Pre-tax income and net income regained healthy margins;
  • Financial measures such as return on average assets (ROA) returned to levels last seen in 2006, while return on average equity (ROE) showed a robust leap to 22.1 percent; and
  • There were signs of improved business conditions. In 2010, cost of funds continued to drop for the third year, and though pre-tax spreads declined in 2010 compared to 2009, they were stronger than spreads between 2005 and 2008. Employment grew in the business development, credit approval and syndication areas while positions in the account services area declined.

The comprises a representative cross-section of equipment lease and loan origination by product, structure and origination. It provides a baseline and benchmark for companies operating in the equipment finance space through a voluntary survey of ELFA member companies. PricewaterhouseCoopers managed the 2011 survey.