According to the late 2018 accounts of the Equipment Leasing and Finance Association or ELFA, about a third of the approximately one-trillion-dollar equipment finance/leasing market in the United States is from small-ticket financing efforts. This segment of the market is called ‘small ticket’ because transactions cost $25,000 to $250,000 each.
With that, it is worth the while to take a closer look at this rather vibrant segment of the country’s overall equipment financing/leasing market. Who are the major drivers of the vibrancy within this segment? What are their reasons for being in it? And what projections do analysts have for this particular segment of the equipment financing market?
Who makes small-ticket equipment transactions?
Because this is financing, two key roles are important: that of the lender and that of those who avail themselves of the lending services.
Upon closer inspection, a quite diverse set of players are on the lender’s side. There are major names such as Wells Fargo and Great America Financial Services. Their participation is indicative not only of the current viability of the market but also of its bright outlook, which we’ll take a closer look into shortly.
On the side of the customers, a diverse set of players are seen as well. From major corporations to individual buyers, there seems to be a lot of interest in getting the services of small-ticket financing institutions for moving equipment or dump truck financing. They seem to also have interests in borrowing money for software upgrades and the purchase of computing units. Roughly, this has been translated to this statistic: more than 60% of all equipment purchases in the country are financed.
What makes small-ticket financing so attractive?
There are at least two major reasons individuals and businesses opt for small-ticket financing services. First is of course their desire to reserve their money for other critical domains. What are these critical domains?
Personnel investment is one good example of a highly critical business domain. When tools and equipment are brought in, the companies would need highly skilled individuals to man them. Getting these skilled employees is not going to be cheap. Needless to say, a driver of heavy equipment will cost significantly more than an ordinary driver. If the company decides to train someone already with them, the costs for training won’t be negligible, either. So it would work to their advantage is money is reserved for all this.
Also, companies go for small-ticket financing or financing services in general because they want to take advantage of the tax benefits associated with equipment purchases. The Internal Revenue Code of the United States has provisions that allow the deduction of the full or partial amount of the equipment purchases from businesses’ taxable incomes.
Outlook for the Small-Ticket Financing Market
Data from various sources show that the small-ticket financial market is up for more growth in the years to come. This is very good news to players who are on the lender’s side of the setup. This projection means more money to mine, given that they are able to come up with the right strategy.
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