Axis Capital Group Funding Review: Equipment Financing On the Rise

Axis Capital Group Funding Review - Equipment Financing On the Rise

Grand Island, Nebraska - From machineries to office equipment, it is possible to lease almost everything for your company. 7 out of 10 companies in America are leasing their business equipment, according to facts presented by the Equipment Leasing and Finance Association (ELFA) and it is still on the rise.

Analysts consider it good news for US economy when in 2014, the latest survey of Equipment Finance Activity from ELFA shows that companies signed up for 9.3% more new loans, leases and line of credit to finance equipment. New business volume also grew across organizational types.

Bank Affiliated, which includes commercial banks, investment banks and multi-line finance companies, rose to 6.2%. The captives which typically provide financing for their manufacturer or equipment supplier rose to 11.3%. Independents drastic increase is up to 17.7%. These are those who directly finance the business.

Among the most-financed equipment type, all saw an overall increase in new business volume. 26% of companies lease transportation equipment which stands to be the leading most-leased equipment. Computer equipment’s came second at 21.7% while only 3.3% of businesses lease material handling.

ELFA also released the forecast on the top 15 trends in 2015 that proves equipment financing as one of the major economic advancement of the country.

Equipment Financing is expected to reach a stunning $1.484 trillion this year with the rapid growth of companies venturing into equipment leasing. Higher growth is possible with aircrafts, trucks and other industrial equipment. As the economy steadily improves and business confidence continues to increase, credit standards should modestly loosen. The propensity to finance decreased in the wake of the financial crisis as businesses deleveraged and refrained from new business investment. Since bottoming out in 2010, the rate at which businesses finance their capital spending has grown consistently and will continue to increase in 2015 with steady economic recovery and shifts in Federal Reserve policy.

Countries from different parts of the world also saw the potential of equipment leasing and have been at par with America on the increase of its rates. Singapore and Indonesia, particularly Jakarta, are known to be Asia’s attractive leasing hub. Construction and infrastructure equipment serves to be leading type of business lease in both countries. 

Big changes are said to be expected in the newest survey by ELFA to be released by June this year. The organization is also in close watch of fraud and scams on this line of business and is establishing ways on how to eliminate these kinds of issues.

Axis Capital Funding Regional Group Review: Equipment Leasing Status in Jakarta, Indonesia

Indonesia is one of the most famous archipelagic nations in Asia. To better understand their equipment leasing status and their market, let us know more about them first.

There are 17,500 islands that make up the archipelago with 240 million population residing in the main islands of Java, Borneo, Sumatra, Suwalesi and New Guinea. They are the fourth most populous country in the world. The country is not only rich with people but also with natural resources like oil, gas, tin, copper and gold among many others. Indonesia has placed 3^rd in the world for mineral resources. It has a republican government and is considered the most corrupt country in South East Asia according to the annual poll conducted by the Political and Economic Risk Consultancy (PERC).

Equipment leasing plays an important role in the country’s economy (US $5 billion) which has been driven by the mining and the plantation industries. Vehicle finance is the strongest contender in equipment leasing. Analysts predict that vendors and joint ventures will soon pave the way for the country’s equipment leasing to international experience. The country’s competitor in this field is Singapore, China and Thailand as Indonesia’s infrastructure industry is the fastest to develop in all Asia, according to reports and the need for leasing equipment is a must.

According to Vinod Kothari Report in 2013, leasing in Indonesia started in 1974 through a joint decree between the “Ministry of Finance, Industry and Trade and Cooperation on License for Leasing Companies”  While Indonesian market has huge potential being a fast growing developing nation, there are bottlenecks at the macro-level in terms of regulatory uncertainty, poor existing infrastructure, corruption etc. With a strong potential for leasing financing in Indonesia and few players to meet the demand, leasing is already on its growth trajectory.

Taxation of financial leasing in Indonesia is included in the decree of law. The rentals paid by the lessee to the lessor shall be expensed by the lessee throughout the lease period. In case of financial lease, the lessee has an option to buy the asset, once that option is exercised, the lessee will be able to claim depreciation on the capital asset on its residual value.

The lessor cannot claim depreciation on the capital goods. He can however do a non-taxable provision (for bad debts) equal to a maximum of 2.5% of receivables. In case this provision is not utilized, the same can be treated as income in the year of its realization. In the instance the provision proves insufficient to meet the losses, the same can be deducted from the gross revenue.

There is a very strong potential for leasing finance in Indonesia. Indonesia needs to invest hugely in areas such as medic al, IT, infrastructure, mining, agriculture, education and transportation.

Leasing of Equipments: Pros and Cons

Many organizations and companies nowadays prefer to lease Their business equipment needs. They have come to realize there are a lot more to Consider and tones of paper works once you own something. Plus, equipments trend to be outdated overtime with the fast pace of technology and modern world. Nevertheless, there are still people who worry on Whether to lease Their equipments. It does not matter if you are in Males in Maldives or Jakarta, Indonesia or in some part of Antarctica but you have to be aware of These pros and cons in leasing equipments.

Pros

• Leasing can save you the hassle and team Involved in finding someone who will extend you credit for purchasing equipment.
• Once your equipment is already outdated, you can change and swap your old ones to something latest in the market and keep pace with technology.
• Short-term leases give you the opportunity to evaluate Whether the equipment fits your needs. You may not need the stuff later on and Therefore you can not risk keeping it in your garage for a lifetime.
• Maintenance may be included in the lease, saving you additional costs. · If you use the leased asset in your business, you may enjoy the potential tax advantage because your lease or rental payments are fully deductible under section 179 tax benefits.

Cons

• For startup businesses, owners are more Likely to shopping shopping spend his own money to secure the leased equipment
• You do not own it. If the equipment is much use to you, you can not claim it for your own. You are always at the mercy of your leasing company and shouldnt always follow the guidelines They have September
• You are obligated to pay for it. Even if you are not using it, you are obliged to pay for the entire duration of the lease contract. Some companies charge large fees for early termination Either or Impose penalties for it or the lease is non- cancellable.

Warning Signs and Tips

• There are a lot of leasing companies out there that Provide rates faulty And Set impossible expectations. Watch out for promises that seem too good to be true. These kinds of companies may be frauds or scams. You can search online for legitimate companies such as Axis Capital Inc. or group of companies can be trusted to for your leasing needs.
• The purchaser needs to read the lease agreement several times before signing. Ask the right questions and make sure to qualify and verify everything. If your leaser can not ask you answer directly but Gives vague statements, it is okay to doubt.
• Everything should not be documented. At the end of the lease, the organization may automatically own the equipment, purchase it, or renew the lease. The end-of-lease options shouldnt be on the lease agreement. The lessee must take care to identify if the lease agreement has an automatic renewal clause.
• If you have experienced foul actions against your leasing company, you can file a complaint to any government agencies such as the Better Business Bureau. Just remember that the business owner should not file the complaint himself the These agencies do not entertain third parties.