I am asked frequently these days; where do you think the economy is going? My response; Who really knows? I often joke that in my second life I would like to come back as either an economist or weatherman. Where else can you get paid so well for being wrong most of the time? One thing I am certain about, however, is that lease financing offers an invaluable tool that, when used properly, can help companies navigate the uncertain economic waters we are adrift in today.
I believe many companies are finding it difficult to chart a business course today because of economic uncertainty. Much of the data made public is contradictory, and it is almost impossible to get consensus from the experts. I’ve read that some economists believe the recession will end in the third quarter of 2009 and grow at a moderate 1 – 2% rate in the fourth quarter and into 2010. Other data suggests that weak employment income growth resulting from high unemployment and disappearing wage increases, coupled with the contraction in household wealth and a shift in the private sector to debt reduction from consumption will dampen the economic recovery. Tightened credit standards, although a necessity, will also slow economic activity. In the short term, the slowing of wage growth will likely help companies generate greater margins which may lead many to believe the worst has passed. But ultimately, lower household incomes and a shift to savings will slow corporate revenues and put pressure on long term earnings and the ability of many companies to repay debt. One report I reviewed stated that the US would not reach full employment again until 2014. Are government deficits the only hope for profits?
Economists do seem to agree, however, that stabilizing the auto and housing industries will help. I read that the inventory of unsold homes has dropped from a high of 12 months to near nine months. Recent price adjustments have lowered the ratio of median home prices to household income from 4.1 in 2006 to 2.8 today. Coupled with a 100 basis point drop in mortgage rates, the housing market may be stabilizing. Government incentives and some better products may also be helping the auto industry.
So what does all of this mean to our customers? That LaSalle is in a position to help companies finance and effectively manage assets utilizing the flexibility offered by lease financing and our asset management programs. Not only do we continue to extend credit to our customers, remember we are part of a well-capitalized $10 Billion bank, but we also offer programs designed to mitigate equipment risk. I tell our customers that if they plan to use equipment for its entire useful life, do not lease it, buy it. But if there are technological or resource utilization risks due to unpredictable events, including economic, lease it. Lease financing provides seamless upgrade migration, refresh or downsizing opportunities. This type of flexibility can be even more beneficial in today’s uncertain economic times.
Let us show you what we can do. 