Leasing to Finance Innovation Jurgita Bucyte Senior Adviser in Statistics & Economic Affairs, Leaseurope

Transcription

1 Leasing to Finance Innovation Jurgita Bucyte Senior Adviser in Statistics & Economic Affairs, Leaseurope AGORADA 2016 Brussels 27 May 2016

2 About Leaseurope Leaseurope represents the European leasing & automotive rental industry 45 member associations in 33 countries* About leasing firms & 500 short term rental companies At least employees Representing around 91% of the European leasing market Including bank-owned lessors, captives, automotive lessors, short term rental companies, independent lessors, real estate lessors etc. *The countries represented are: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, Morocco, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia & Montenegro, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine and the UK

3 Leasing in Europe In a nutshell: New leasing volumes per region in 2014 (in Bil ) 276 billion new lease volumes granted in 2014 ~1 400 leasing firms Bank owned, manufacturer owned (captive) & independent lessors All types of assets Average contract size: 29,400* Total new lease volumes per asset category, % Real estate Machines & equip 6% 8% 18% CVs 16% Cars Source: Leaseurope Annual Statistical Enquiry 2014 *2014, excluding real estate, if real estate is included, average of 31,500 ICT Big/other 5% 47%

4 What is leasing? Asset title (lessor has ownership) Rental payments Supplier Leasing Company Customer Payment for asset Right to use asset

5 What can be leased?

6 Who can lease? SME finance landscape Leasing equally suitable and accessible for the entire range of SME customers, including micros, gazelles, high tech, specialised firms and all other firms. Suitable across the entire SME lifecycle.

7 SME lifecycle and finance choice Leasing enables firms to expand faster SMEs using financing type by age, 2010 SMEs using financing type by age, % 70% 60% Personal funds Leasing Factoring Loans 1-3 years Short-term credit Loans >3 years Trade credit 80% 70% 60% Personal funds Leasing Factoring Loans 1-3 years Short-term credit Loans >3 years Trade credit 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% < 2 years 2-5 years 5-10 years >10 years Source : Oxford Economics/EFG 0% < 2 years 2-5 years 5-10 years >10 years Source : Oxford Economics/EFG Leasing is increasingly important for young firms (< 2 years of age) and remains a key source of finance across all other lifecycle stages. 40.3% of firms operating for less than 2 years used leasing in 2013, up from 25.6% in This proportion rises to 42.4% for more established firms (>10 years).

8 Leasing as a tool for various clients Supporting European SMEs Supporting European manufacturers Supporting public sector LEASING ALLOWS SMES TO: Finance the full purchase price of an asset without requiring any collateral Better manage their working capital Return their leased equipment if needed Leasing is particularly appropriate for small businesses and has been a constant source of support for SMEs through difficult economic times. MANUFACTURERS PROVIDE LEASING SOLUTIONS BECAUSE IT ALLOWS THEM TO: Sell more equipment Sustain a competitive advantage Increase repeat business LEASING ALLOWS PUBLIC SECTOR TO: Increase efficiency in public spending Access the latest clean technology Build projects for schools, hospitals, etc

9 Leasing s role in supporting manufacturers The most popular means of accessing a lease is through an asset vendor or dealer at the point of sale. Thus providing a convenient one-stopshop for obtaining both the use of an asset as well as a financing solution. Due to this, leasing provides a valuable form of support to European manufacturers who use leasing to sustain their sales, launch new products and increase their business. Proportion of lessees using each channel by firm size, 2013 Vendor Bank 100% Lessor Brokers 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Micro Small Medium SMEs Source : Oxford Economics/EFG

10 Leasing s role in supporting manufacturers In fact, over 80% of surveyed manufacturers viewed leasing to be either key to closing sales or an essential and integral part of the manufacturing business. Importance of Finance to Construction Managed as a separate profit centre Equipment Manufacturers Essential and integral part of the business Key to closing sales Marginal importance Barrier to doing business 0% 20% 40% 60% % Survey respondents

11 Agriculture Construction Mining & utilities Manufacturing Transport & storage All sectors On average, lessees invest 123% more than non-users of leasing. Evidence on exporting and growth lessees supports an EBRD study (2011), which finds SMEs that use leasing tend to perform better than those who don t. Fig 49 - Investment finance Leasing supports SME investment Fig 49 - Investment (estimate), finance SME lessees in 2010, 20 Proportion of investment financed b Fig 49 - Investment (estimate), finance SME in lessees 2010, 2013 and 2014 At EU level, leasing was responsible for was responsible for financing just over 9 million individual SMEs and ~ 104 billion of SME investment in fixed assets in 2013 ( 121 billion is estimated in 2014). 100% Fig 49 - Investment (estimate), finance SME Proportion in lessees 2010, of 2013 investment and 2014 financed by: 12.3% 90% (estimate), SME Proportion lessees of investment 100% financed by: 80% 12.3% 10.9% Proportion of investment 100% financed by: 90% 12.3% 30.1% 80% 70% 10.9% 11.3% 100% 90% 60% 30.1% 28.9% 12.3% 70% 10.9% 11.3% 90% 80% 30.1% 60% 50% 28.9% 27.8% 80% 70% 25.2% 30.1% 50% 28.9% 40% 27.8% 70% 60% 25.2% 29.7% 30% 60% 50% 40% Fig 49 - Investment finance in 2010, 2013 and % Fig 49 - Investment (estimate), Fig finance 49 -SME Investment in lessees 2010, 2013 finance and 20% 29.7% 29.7% 50% 40% Average investment 30% financed , by leasing % per and asset 2014 type (estimate), SME 25.2% Proportion lessees (estimate), capital of investment intensive SME 20% 29.7% financed lessees sectors, by: 10% 29.7% 40% 30% % Medium & heavy commercial 30.5% vehicles Proportion of investment 100% Proportion financed of by: investment financed 0% by: 30% 20% 10% thousand Passenger cars & light commercial vehi 12.3% 10.9% 100% 11.3% 90% 100% 32.4% Other 30.5% equipment % 20% 10% 12.3% 10.9% 0% 12.3% ICT 11.3% & 10.9% office equipment 11.3% 90% 32.4% 80% % 30.5% 2010 Leasing Machinery 31.1% & industrial Cash equipment / Equity % 30.1% 28.9% 27.8% 80% 0% 70% % 30.1% 28.9% 30.1% Leasing 27.8% 28.9% 27.8% 70% 60% 70% Source Cash : Oxford / Equity Economics/EFG Bank Loans 0% (estim % 2010Leasing 50% 60% Source Cash 2013 / Equity : Oxford Economics/EFG Bank 2014 Loans (estimate) Other Debt Fina 25.2% 29.7% 29.7% Leasing 50% Cash 40% / Equity 50% 80 Bank Loans Other 25.2% 29.7% 25.2% 29.7% Debt Finance Source : Oxford Economics/EFG 29.7% 40% 30% 40% 40 Source : Oxford 30% Economics/EFG 20% 30% % 30.5% 31.1% 20% 10% 20% 32.4% 30.5% 32.4% 31.1% 30.5% 31.1% 10% 0% 10% 0% 0% (estimate) 2010Leasing Cash / Equity Bank 2014 Loans (estimate) 2013 Other Debt 2014 Finance (estima Leasing Cash / Equity Leasing Bank Cash Loans/ Equity Other Debt Bank Finance Loans Other Debt Financ Source : Source Oxford : Economics/EFG Oxford Economics/EFG Source : Oxford Economics/EFG Source : Oxford Economics/EFG Of those SMEs that use leasing, more of their investment is financed by leasing (30.5%) than by other types of finance.

12 Factoring Private equity/venture capital Trade credit Personal funds Retained earnings Leasing Short-term credit Loan 1-3 yrs Loan >3 yrs Leasing as a vehicle for growth in Europe Leasing has been a constant and reliable source of support for millions of European SMEs even during times of economic crisis. Around 43% of all European SMEs used leasing in Leasing industry finances more than 20% of European business equipment investment Proportion of SMEs using finance type, 2010 and % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % 42.5% Oxford Economics (2015) estimate that a modest uptake of leasing by SMEs would add an extra 0.3% to 0.7% to the level of GDP by the end of Source : Oxford Economics/EFG

13 Benefits of leasing Lessees can finance 100% of the purchase price of the asset without the need to post additional collateral, legal ownership provides built-in security Other secured lending is typically not done on the basis of physical collateral (e.g. preference for guarantees, etc.) as providers of these products do not have the same expertise as lessors when it comes to evaluating & managing physical assets Firms can manage their working capital more effectively by spreading payments for the use of the asset over the contract period Enables clients to upgrade their assets easily to the latest technologies so that they may remain competitive Can be accompanied by an array of services (insurance, maintenance etc.) allowing clients to effectively outsource all of their asset related needs in one convenient package Often more affordable and quicker to obtain than other forms of finance and provides greater operational flexibility in comparison to the outright purchase of an asset eg. matching duration of use to effective business needs

14 The ongoing quest for innovation Leasing plays a central role at the heart of the real economy. Innovation as a concept comes with different definitions from different sectors of the industry. Future trends Develop services and solutions (mobility ) Finance new markets (cloud, third platform, new energy ) Foster innovation (big data, internet of things ) Asset focus and specialisation (new energy, 3D printing ) Looking ahead, the European leasing industry aims to remain at the forefront of innovative financing solutions in order to facilitate the ongoing shift from ownership to usage

15 Facilitating SME investment through leasing Across Europe, policymakers and other stakeholders continue to stress the importance of supporting SMEs as a means of generating economic growth and jobs. Existing evidence demonstrates that leasing is a vital source of finance for SMEs. Given this fact, European and national initiatives that raise SMEs awareness of leasing would help in ensuring that European SMEs can invest and expand in the future. -> Targeting: SMEs Manufacturers/ vendors Public sector Leasing as a valuable financial tool for SMEs, especially for growth, exporting and innovative firms

16 Channelling funding to SMEs that need it it is key to achieve the right incentives and to support institutions that are best placed to provide SME access to finance. E.g. effectively implementing national and the EU guarantee schemes to facilitate SME financing through leasing. Leasing companies are acknowledged as natural partners for intermediating the EIB group financing to reach SMEs in the EU. - Due to their vast expertise in national and sectoral markets and direct links to a wide range of enterprises Facilitating SME investment through leasing In 2014, the EIB provided more than 22 bn in finance to SMEs through financial intermediaries, of which approx. 1.5 bn to leasing companies for supporting SMEs in the EU 17,000 SMEs received finance for their leasing projects and they employed more than 750,000 people.

17 Thank you for your attention! Find out more about the benefits of leasing and its contribution to the EU economy in a video clip by Leaseurope For more information please contact j.bucyte@leaseurope.org