Equipment Leasing Takes A Plunge In December

Posted in Business, Business Cash Advances, Business Loans, Leasing Equipment by Eileen
January 29, 2009

Alternatives To Business Loans

The Equipment Leasing and Finance Association reports that the December Monthly Leasing and Finance Index showed a drop of 13.3 percent in December, compared to the same period in 2007. The index tracks equipment-financing activity. The MLFI-25 index is used in conjunction with other economic reports to provide an overall picture of the health of manufacturing and production in the United States.

New business volume declined by 3.6 percent. One bright spot in the report shows that month-to-month new business volume increased 120 percent in December, compared to figures for November. The report also tracks the status of receivables over 30 days old. The index shows a drop of 3.7 percent in December over outstanding receivables in November. Credit approvals dropped to an all-time low of 71.5 percent and more than one-third of responding businesses reported fewer transactions in the month of December.

The availability of credit continues to affect businesses and their production capacity. The Small Business Administration reports that its 504-loan program, designed to help small firms purchase major assets fell 82 percent in the first quarter of 2009, compared to the same time period in 2008. 7(a) loans, designed to help small businesses start up, fell by nearly half.

Loan volumes are significantly lower, in part, because the programs are administered through private lenders. While the federal government backs 85% of each SBA loan, applicants must still meet tougher lending standards. Even with only 15% capital at risk, many banks feel that start-up companies and those that want to expand represent too much risk.

One option for small business owners is a business cash advance. These loans provide unsecured working capital for businesses and are based on a merchant’s future credit card transactions and are often easier to acquire than a small business administration loan or a loan from a private lender. To get a business cash advance, the business must be registered in the US, accept Visa or MasterCard and have credit card sales that exceed $2,500 per month. Unlike loans, the business cash advance can be used for anything, including the purchase of equipment.