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/  For specific data on leasing options contact Mazuma Capital 801-816-0800 http://www.mazumacapital.com/

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.

ELFF Study: Changes to Lease Accounting

Proposed changes to lease accounting rules will significantly impact the balance sheets and operations of companies that use lease financing (lessees) and providers of lease financing (lessors), according to a new study from the Equipment Leasing & Finance Foundation.
The study, “Changes to Lease Accounting: Rules, Reactions and Realities,” is designed to help users understand the proposed changes, recognize the market impact of the changes, and identify the challenges and opportunities they represent.
The lease accounting proposal was released by the International Accounting Standards Board and the Financial Accounting Standards Board in August, and a final rule is expected in 2011. Although the proposal is intended to standardize the lease accounting process, it is expected to add significant complexity and processes to both lessor and lessee accounting.
The Foundation’s study examines how the changes are expected to:
• Affect customers’ propensity to lease
• Alter the attractiveness of lease financing
• Modify customers’ approach to lease transactions
• Change how lessors develop and market financial products
• Impact lessor and lessee business processes and related portfolio management systems
• Influence lessor business models and ownership structures
• Affect equipment leasing and finance providers’ decisions to remain in the market or encourage new entrants to replace them
“While the full impact of the lease accounting changes on the equipment leasing and finance industry is still unknown, both lessees and lessors are advised to take action now,” said Edward Dahlka, chairman of the Foundation and President of Assurance Asset Finance. “First, submit a comment letter to the FASB and IASB that provides your company’s views on the changes. Second, use the Foundation’s new study to develop a plan of action so you’ll be ready for the impending changes.”
To read the executive summary of “Changes to Lease Accounting: Rules, Reactions and Realities” the full report can be purchased here http://www.leasefoundation.org/IndRsrcs/MO/FASB.htm.
The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at http://www.leasefoundation.org/.