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Infographic: Equipment Financing Trends

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Equipment financing solutions allow companies to obtain the latest, most advanced equipment and stay competitive with their tech-savvy rivals. Many companies, however, may not want to spend the money unless and until it’s absolutely necessary. Here is a look at which industries are prioritizing investments in new equipment and software and a review of the pros and cons of leasing versus financing.

[hed] Keep Your Business Up to Date With Equipment Financing [dek] U.S. business investments in equipment and software are expected to hit new highs in 2016, but how many of those dollars are being financed through loans, leases and lines of credit?  [intro] Keeping up to date with new equipment is crucial for businesses to stay competitive. Staying current comes at a price, but don’t let these expenses delay needed upgrades. Instead, consider the different options for acquiring new equipment.  [subhed] Equipment Financing  An increasingly popular alternative: The amount of U.S. businesses investing in plant, equipment and software continues to increase each year. And of those investment dollars, the percentage projected to be financed through loans, leases and lines of credit grew as well.  2014 - $1.5 trillion was spent on investments in plant, equipment and software, and $860 billion of that total (57%) was financed through loans, leases and lines of credit.1  2015 - $1.5 trillion was spent on investments in plant, equipment and software, and $922 billion of that total (62%) was financed through loans, leases and lines of credit.2  2016 - $1.63 trillion is expected to be spent on investments in plant, equipment and software, and $1.05 trillion of that total (64%) is projected to be financed through loans, leases and lines of credit.3  Tip: By leasing your equipment, you can get the equipment or software upgrades you need without your budget taking a big hit.  These investments aren’t limited to information technology. Equipment finance dollars in 2014 were distributed as follows:4 28.5% - Transportation 19.7% - IT and Related Technological Services 11.3% - Agricultural 11% - Construction 4.2% - Industrial/Manufacturing 4.2% - Office Machines 4% - Medical  As of January 2016, confidence in the equipment finance industry is 54 out of 100. However, 17.9% of executives expect more access to capital to fund equipment purchases in the beginning of 2016.5  [subhed] Leasing vs. Financing Many industry-diverse companies are opting to lease equipment and take advantage of the following benefits:  Reduced upkeep costs: Companies who choose to lease equipment do not need to budget for ongoing maintenance requirements.6  Increased flexibility: You can lease the appropriate equipment for a timeframe that suits you.7  Tax deductible: Under the 179 IRS Tax Code, the cost associated with leasing business equipment is tax deductible.8  No down payment: In addition to upkeep costs, there is typically no down payment required for an equipment lease.9  Some businesses prefer to loan, or purchase, equipment, which has benefits of its own:  Ownership: Companies taking the loan option will hold the legal title to the equipment.10  Depreciation allowance: You may claim a tax deduction for a portion of the loan payment as interest and for depreciation.9  Low rates: Equipment finance loans typically come with low interest rates.11  [subhed] The Year Ahead Since the historically low interest-rate environment is coming to an end, this will encourage businesses to invest in upgrades before interest rates increase further. Depending on the industry of your business, you might find a more competitive equipment-leasing environment than others.12  Overall, equipment and software investment is expected to grow by about 4.4% in 2016. Some industries will see this more than others, especially in the first half of the year.13  Investments expected to strengthen over the next 3-6 months: Aircrafts Ships and boats Computers Software  Investments expected to remain weak over the next 3-6 months: Agriculture machinery Materials handling equipment Mining and oilfield machinery Railroad equipment  Investments expected to slow slightly or remain mostly steady over the next 3-6 months Construction machinery Other industrial equipment Medical equipment Trucks  With how quickly technology advances, it doesn’t take long for equipment to become obsolete, and outdated equipment can be a liability. Deciding whether to lease or buy business equipment depends on the state of your business and your financial goals.

Contact your SunTrust banker today to learn more about financing or leasing options that can put your business on a healthy path forward.


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