Exclusive: U.S. business investment continues to drop

24. Feb. 2010

CHICAGO - U.S. businesses continued to postpone financing new investments in their operations in January, but delinquencies among existing borrowers stabilized and outright defaults fell, according to a trade group for lenders that finance half the capital equipment investment in the United States.

The Equipment Leasing and Finance Association told Reuters that the overall volume of financings used to fund equipment acquisitions fell to $3.4 billion in January, down 24.4 percent from last January and down 52 percent from the previous month.

But other measures tracked by ELFA suggested businesses were finding it a little easier to remain current on their existing loans.

ELFA said the percentage of borrowers delinquent 30 days or more on their capital spending loans, leases or lines of credit was 4.3 percent in January, unchanged from December but up from 4.0 percent last year. Those delinquencies peaked in September 2009 at 5.6 percent of total receivables.

Charge-offs, or the percentage of receivables the lenders considered uncollectable fell for a second straight month to 1.68 percent in January, down from 2.08 percent in December but up from 1.41 percent last year. Those losses also peaked last September at a little over 3 percent of total capital spending receivables.

"Most companies remain reluctant to invest in new capital equipment without further signs of a true economic recovery," said Jud Snyder, the president of M+I Equipment Finance Co in Milwaukee and a member of ELFA.

Snyder said a continued rise in credit approvals -- they reached 70.9 percent in January, according to ELFA, their highest level since October 2008 -- was another bright sign that, taken with the stabilization of portfolio quality, suggested a distant light at the end of a long tunnel.

"It's early," Snyder said, "but hopefully these are trends that point to the start of a new economic growth cycle."

ELFA's report, provided to Reuters on Tuesday, a day ahead of its official release, underscored the tentative nature of the current recovery from the recession, which has been marked by a sharp and prolonged pullback in business spending.

Also on Tuesday, the Conference Board said that U.S. consumer confidence fell in February to its lowest level in 10 months and the Standard & Poor's/Case-Shiller index showed U.S. home prices unexpectedly slipped in December.

ELFA's members include Bank of America Corp (BAC.N), Canon Inc's (7751.T) Canon Financial Services, Caterpillar Inc's (CAT.N) Caterpillar Financial Services Corp, CIT Group Inc (CIT.N), Dell Inc's (DELL.O) Dell Financial Services, Deere & Co's (DE.N) John Deere Credit Corp, Siemens AG's (SIEGn.DE)Siemens Financial Services and Verizon Communications Inc's (VZ.N) Verizon Capital Corp.

More than half the money invested in plants, equipment and software in the United States in any given year is financed with loans, leases and lines of credit.
[Reuters]