Leasing to European SMEs

ALB | November 2012

Tanguy van de Werve
Leaseurope Director General
2
US
ELFA
154 bil
Leaseurope
232 bil



Japan
JLA
41 bil
New equipment leasing volumes. ELFA figures do not include passenger car leasing
Source: Leaseurope 2011 Annual Survey, local leasing associations, Leaseurope estimates
Brazil
ABEL
7 bil
Australia
AELA & AFLA
16 bil
Global Equipment Leasing Markets in 2011
Canada
CFLA
27 bil
China
CLBA
106 bil
11%
1%
-28%
13%
16%
100%
16%
3
Source: Leaseurope 2011 Annual Survey
Annual growth rates based on a homogenous sample of members reporting in Leaseuropes
2011 Annual Statistical Enquiry and are adjusted for exchange rate fluctuations
Evolution of new business by country
New business, annual % change (2011/2010)
Non - members
20% to 30%
30% and higher
- 20% to -10%
10% to 20%
NA
-10% to 0%
- 20% and lower
0% to 10%
European Leasing Market in 2011
4
Regional performance by movable asset category
New business growth - annual % change (2011/2010)

Growth rates are calculated based on a homogenous sample of members reporting & are adjusted
for exchange rate fluctuations
Source: Leaseurope 2011 Annual Survey
* The category Other for IT includes some renewable energy assets

15%
12%
15%
-10%
-36%
5%
18%
26%
10%
13%
4%
-25%
-13%
-24%
16%
4%
15%
8%
14%
3%
-12%
16%
13%
18%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Machines & Equip ICT Vehicles Big/Other
18%
-6%
-2%
DE UK FR IT* MED.
Benelux,
AT,CH
CEE
Nordic,
Baltic
-30%
-40%
33%
64%
-29%
European Leasing Market in 2011
5
H1 2012
New volumes*
119 bil
Source: Leaseurope Member Associations
*28 member associations reporting; growth rates adjusted for exchange rate fluctuations
H1 2012/11 %
-1.0%
NA
0% to 10%
10% to 20%
-20% and lower
-10% to 0%
-20% to -10%
European Leasing Market in 2012
20 % to 30%
30% and higher

The use of leasing amongst
European SMEs
With the support of
A report prepared for
Leaseurope

Lack of data at European level on SMEs use of leasing:
Research on leasing to SMEs
- European Central Bank Finance Survey covers SMEs but doesnt focus on
leasing on its own, and only covers Eurozone countries
- European Commissions Flash Barometer right scope but out-of-date (pre-crisis)
- Leaseurope Annual Statistical Enquiry detailed information on European leasing
market, however no split by firm size
- National data sources few; not directly comparable

This research establishes evidence at European level on the importance of
leasing to SMEs as a source of financing their investment
Based on a unique survey of ~3 000 firms by telephone in 8 countries (DE, FR,
UK, IT, ES, NL, PL and SE), across 9 sectors
The survey was carried out in July 2011
Leasing defined in the broadest sense: right to use an asset for a period of time
Rationale for the research
Leaseurope


How important leasing is to European SMEs
- How many SMEs use leasing?
- How intensively do they use leasing to finance
investment?
- What is the size of the SME leasing market?

What assets do SMEs lease and through
which channels?

Why do SMEs lease (or not lease more)?

About the role leasing play in driving SME
investment and growth
- Lessees invest more
- Leasing enables SMEs to expand
- Economic impact of more SME leasing

Details on how to obtain your copy can be found on the SME
report page of www.leaseurope.org




What does the report tell us?

Leaseurope

In comparison
6 million SMEs used
leasing in the
8 countries sampled
100 billion of
SME investment
in fixed assets was
financed through
leasing
This represents 52%
of the business
leasing market
in Europe &
45% of the total
leasing market
the European Investment Bank provided 10 bn in direct SME loans through banks
63,000 SMEs supported

SME Guarantee Facility of the European Investment Fund (EIF) supported 1.2 bn
in direct loans to SMEs
20,000 SMEs supported

EIF invested 930 mil in 42 equity and mezzanine funds as SME support

Venture and enterprise capital helped finance 16,700 SMEs in Europe between 2007
and 2010, totalling 46.5 bn according to the European Venture Capital Association
2010
European SME investment through leasing
Leaseurope

40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
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Investment by funding type - all SMEs
Percent of firms using finance type in 2010
Source : Oxford Economics/EFG
How many European SMEs use leasing?

40% of all SME firms used leasing in 2010 more than any other individual
form of external financing, and we expect more of them will in 2011 (43%)
- This equates to an estimated 6 million
individual SMEs who rely on leasing in the 8
countries in our sample

- More SMEs use leasing than bank loans of
> 3 years

- Use of leasing increases with SME size

- Micros generally make less use of all forms
of external finance

Leaseurope

31.2%
28.3%
15.5%
13.8%
36.7%
39.4%
18.6% 16.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011
Cash Bank loans
Leasing Other
Investment finance in 2010 and 2011 - all SMEs
Proportion of investment financed by:
Source : Oxford Economics/EFG
/Equity
debt
Loans of < 3 years
Loans of > 3 years
Short term credit
(incl. overdrafts,
credit cards)
Leasing as a share of SME investment
At EU level, leasing was responsible for financing just over 100 billion of SME investment
in fixed assets in 2010 (112.5 billion expected in 2011)

The share of SME investment financed by leasing is set to increase from 16.7% in 2010 to
18.6% in 2011. By contrast the share of all forms of bank lending taken together (loans,
overdrafts, etc.) was 31% in 2010 and is expected to decrease in 2011

Leaseurope

Through which channels do SMEs access leasing?
0%
10%
20%
30%
40%
50%
60%
70%
80%
Micro Small Medium SME Average
Vendor Bank
Lessor Brokers
Proportion of lessees using each channel by firm size,
2010
Source : Oxford Economics/EFG
The most important channel for accessing leasing is the vendor or point of sale
channel providing clients with a one stop shop for assets and financing solutions:
- 67% of lessees used the vendor channel in 2010
- 58% accessed leasing through a banking channel
- 36% accessed directly from the lessor
Leaseurope

Leasing is one of the funding sources that new firms are able to turn to most
quickly
- The use of leasing increases from 26% for SMEs less than 2 years old to 50% for SMEs
aged between 2 and 5 years
- The take-up of bank loans (> 3 years) increases from 29% to 38% for these age groups
0%
10%
20%
30%
40%
50%
60%
70%
80%
< 2 years 2-5 years 5-10 years >10 years
Retained earnings
Private equity
Equity Funding
Source: EFG
Firms using funding type by age
0%
10%
20%
30%
40%
50%
60%
70%
80%
< 2 years 2-5 years 5-10 years >10 years
ST bank credit
Trade Credit
Leasing
Loan >3 yrs
Loan <3 yrs
Personal funds
Factoring
Non-equity financing
Firms using financing type by age
Source : Oxford Economics/EFG
Leasing enables firms to expand faster
Leaseurope

0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
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Lessees
Non-users
SME investment by lessees and non-users
m
Source : Oxford Economics/EFG
0
100
200
300
400
500
600
700
800
900
1000
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Lessees
Non-users
EU investment spending by enterprise size
thousands, 2010
Source : Oxford Economics/EFG
Lessees invest more
On average, lessees invest 53% more than non-users of leasing. This trend also
holds across sectors (except agriculture) and countries.
- Difference between lessees & non-users especially pronounced amongst small firms -
small firms who leased in 2010 reported investing an average of 302 000, i.e. over
100 000 more than non-users.
- Small lessees in particular may invest more than non-users because they are taking
advantage of one of the few external financing options available to firms of that size.
Leaseurope

Leasing is attractive to SMEs in many different circumstances and can meet the
needs of diverse businesses
Why do firms lease?
Reasons to use leasing:
1. Better price than other forms of finance
2. Tax benefits
3. Ability to finance up to 100% of the purchase price of an asset,
without having to provide any supplementary guarantees or collateral
4. Enables better cash flow management
5. Ability to adapt the length of the contract according to your companys
needs
6. Accounting benefits
7. Predictability and transparency of rental payments
8. Ability to use assets without bearing the risks of ownership e.g. risks
on second hand asset values or the disposal of the asset
9. Ability to upgrade and renew assets more frequently than purchasing
would allow
10.Ability to bundle finance with optional services e.g. installation,
insurance, maintenance repair of the leased asset
11.It is easier / faster to obtain leasing than other forms of finance

0.7
0.6
0=not at all important
R
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1=very important
Leaseurope

Macro-economic contribution:
Baseline Oxford Economics forecasts for GDP
growth from 2010 onwards, assuming PR kept
at 2010 rates.
Scenario 1 Impact of firms leasing at 2011 PR
vs 2010 PR
What would the impact on potential output of a
permanent shift to 2011 PR levels be?
Scenario 2 micro firms increase leasing to
small firm PR
Micro firms currently finance 10% of
investment via leasing. What if they increase
this to 16.7% (small firms PR), but keep other
investment constant?
Scenario 3 Leasing boom
Assumes all categories of firm increase PR
from 2011 levels by the same amount as
whole economy PR fell 2008-2010. This is the
most ambitious scenario.
12.75
12.80
12.85
12.90
12.95
13.00
13.05
13.10
Baseline - 2010
Penetration
rates
Scenario 1 -
2011
penetration
rates
Scenario 2 -
higher micro
leasing
Scenario 3 -
leasing boom
Potential output under leasing scenarios
trn, 2010 prices, total for France, Germany, Italy, Netherlands, Poland,
Spain, Sweden and UK
Source : Oxford Economics
Potential output under leasing scenarios in 2020
trn, 2010 prices, total for FR, DE, IT, NL, PL, ES, SE and UK
+1.5% on level of GDP

Or

+ 200bn
+ 0.9 to 1.0% on level of GDP

or

+ 100bn each
Macro-economic contribution of increased leasing PR
Leasing to European SMEs
ALB | November 2012
Tanguy van de Werve
Leaseurope Director General