The Leasing Industry’s Impact on the Economy and Business Opportunity
Equipment leasing has long been recognized for the many benefits it provides, particularly to small businesses. The 2005 annual survey that the Equipment Leasing Association (ELA) conducted among the Small Business Administration’s (SBA) State Small Business Contest winners showed that nearly three-quarters lease some of their equipment. The top reasons they cited for leasing are the ability to have the latest equipment, consistent expenses in budget planning, help managing company growth and no down payment.
Rapid growth and the need to keep up with customer demand are the reasons many small startup businesses lease rather than buy. But lower monthly payments and protection against obsolescence are reasons for leasing on an ongoing basis. Obsolescence is a concern to any business that uses technology-based equipment.While these benefits provide critical operational efficiencies, those of us in equipment leasing have long understood that the industry’s overall and greatest contribution is providing access to capital. ELA commissioned a study conducted by Global Insight, a global economic and financial forecasting company, the results of which quantified the impact of equipment leasing and finance on the U.S. economy. While the report results demonstrate leasing’s effects on a macroeconomic level, of even greater significance are the lessons from the report that businesses can use to operate their own firms more efficiently and productively.
The results of the study show that, annually, over the five-year period from 1997-2004, the equipment leasing industry’s effect on the economy:
• Produced at minimum $75 billion and as much as $315 billion in additional real gross domestic product (GDP).
• Produced more than $225 billion additional real equipment investment.
• Created at minimum three million jobs and as many as seven million additional jobs.
A Valuable Economic Engine
These figures demonstrate that equipment leasing clearly stimulates the economy. At the same time, it creates opportunities for businesses and individuals. Job growth creates opportunities for employees and their families to advance their financial condition and lifestyle. The access to capital that equipment leasing provides to companies allows opportunities to build and grow that might not exist without leasing.
So what lessons should businesses take away from the wider economic implications of equipment leasing? For one, the report’s sizable real equipment investment figures underscore that equipment leasing is a viable equipment acquisition method, and therefore, it is advisable for savvy businesses to investigate leasing as an option for their equipment acquisition.
Leasing for Greater Productivity
Leasing has proven to be a fundamental component of supply chains, as the following factors from the Global Insight report bear out:
• Leasing, as a way of acquiring the use of equipment, cuts across goods-producing and services-producing industries in the U.S. economy.
• Leasing is a crucial mechanism to acquire a variety of equipment types, especially high-technology equipment, which is vital to innovation and growth. In fact, information equipment, particularly computers, accounted for $113 billion, or approximately one half of real equipment investment from leasing. All capital goods equipment categories - especially transportation and industrial equipment - account for most of the balance.
• Leasing arrangements are used by all sizes of businesses, even though their capital requirements may differ.
From business aviation to manufacturing equipment to enterprise software, leasing can help businesses obtain the equipment necessary to remain competitive and take advantage of new business opportunities that otherwise might be out of reach.
Michael Fleming is President of the Equipment Leasing Association, the premier non-profit association representing companies involved in the equipment leasing and finance industry to the business community, government and media.
(c)Equipment Leasing Association 2005. Reprinted with permission.
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