|
|
Positive Attitude Towards Business Opportunities Prevail
at ELA Executive Committee meeting ELAonline Companies are thinking Offense and External rather than Defense
and Internal. The Equipment Leasing Association Executive Committee held
its annual planning meeting in Colorado August 18–20, 2003. ELA Chairman
Ed Dahlka convened the meeting of thirteen officers and directors for
an initial discussion of the state of market segments, products and
companies. The executive committee represents a cross section of companies
and markets in the association. The discussion was the most positive
discussion in two years. The most frequent general comment was that
“business is good, not strong, and things are going in the right direction
now”. The following are
general observations from the discussions. - While business is back, it is not as profitable. There
still is a lack of pricing power in the markets because there are “ten
dogs on every bone”. - Capacity is somewhat constrained by credit and concentration
considerations. - Funding is available for good deals and / or companies. - The middle market is dominated by strong balance sheet
companies. There are more barriers to entry as the market can only afford
“so many mouths at the table”. - The economic downturn squeezed out the marginal business
and poor business models. - 2003 losses will be much lower than in 2002. - Noticeable entry of small and smaller regional banks into
the business – small ticket and low end middle market. - Lessors have not capitalized on the poor economy. They
became used to a robust economy through 2000 and were not prepared to
do a pure leasing business. The FMV business is not being pushed enough.
It is easy to do a “debt oriented” business, but that is not a good
business. The “debt oriented” product takes away the upward profit potential
and the leasing differentiated and visibility. - Banks demand a huge “tax bang” from their leasing subsidiaries
and loans won’t do the job. - If ever there was a time for expansion of a FMV product,
now is the time. - The funded domestic Large Ticket market is weak but the
QTE, lease to service contract and cross border markets are good. - Accounting regulations, federal and state tax legislation
and Basel II are biggest challenges to leasing companies today. Woven through this discussion is the concern that equipment
leasing could lose its edge. Over and over the question was raised,
“is there entrepreneurial ship in the business today?” When a question
is asked this often, doubt is the obvious answer. The pure leasing product
has important attributes that are creative and entrepreneurial, however,
leasing companies and ELA may not be doing enough to promote the value
of these attributes and differentiate them from loans. There was discussion
that certain accounting standards and federal tax initiative may not
only push, but require lessors to move towards a more pure leasing oriented
business. With all of these discussions as background, the executive
committee went on to plan a proposed 2004 Strategic Program of Work
for ELA. The ELA will act on the proposed plan and budget on October
11. The Highlights include: - Additional resources for two program areas of highest importance
– Advocacy and Business Development. Expansion to include: - Greater grassroots participation by members in legislative
and political efforts of ELA. - Greater use of external issue analysis consultants and
legislative action personnel at both the federal and state levels. - External market opinion research into companies’ attitudes
towards the leasing product and its attributes. - An Equipment Leasing advertising supplement, an advertorial,
to be included in most likely a spring edition of Fortune. - Expanded research into the various business and market
impacts of proposed accounting standards changes. - Strengthen the level of responsibility of the Business
Council Steering Committees so that distinct needs of various industry
segments can be better articulated and value provided. Improve the quality
of customizing programs and services. - Confirmed ELA’s opposition to federal and state initiatives
to codify what constitutes Economic Substance in an activity or transaction
because it could result in unintended consequences such as narrowing
business or causing confusion. However, the Executive Committee did
direct that ELA resources should be used to influence the definition
of economic substance if law makers do indeed proceed with legislation. - Add a Bank Leasing Conference. - Through the use of technology, expand current conferences
or segments of current conferences to more people deeper into member
companies. - Continue the market strategy of focusing on increasing
the value of ELA programs to existing members through wider participation
in and interaction with the services of the association. - Approve a 2004 budget of $8.55 million in revenue and $8.5
in expenses.
|
|
