Exclusive: Big gains in U.S. business borrowing, says ELFA

By James B. Kelleher

CHICAGO (BestGrowthStock) – A key measure of U.S. business sentiment improved sharply in September, a lender group told Reuters on Monday, as companies increased their investment in equipment and software and did a better job of staying current on their existing debts.

The Equipment Leasing and Finance Association said that U.S. businesses originated $5.8 billion in loans, leases and lines of credit last month to invest in capital equipment, which can include everything from tool-and-die machines and delivery trucks to office furniture and computer hardware and software.

That was up 23 percent from September 2009 and the largest year-over-year increase in two years, ELFA said, driven by investment in technology and healthcare equipment.

The group, which represents the lenders who finance half the capital investment in the United States each year, said 3.41 percent of borrowers were delinquent 30 days or more on their borrowings in September, down from 4.27 percent in August and 5.60 percent last year — the biggest year-over-year decline in past-dues in two years.

“While it’s not time to claim we are in a robust environment, clearly businesses are starting to invest in capital equipment,” said Steve Grosso, president and chief operating officer of CoActiv Capital Partners Inc, an ELFA member based in Horsham, Pennsylvania.

“In many cases, we see older equipment that is worn out being replaced or newer technologies being installed. We haven’t seen great large-scale expansion. The technology sector and healthcare seem to be strong versus infrastructure and manufacturing which still remain flat.”

The group said that 72 percent of all credit applications were approved in September. That was down slightly from the two-year high of 73 percent seen in August but up from 67.9 percent last year.

The charge-off picture was more mixed. ELFA said lenders in September considered 1.7 percent of the loans in the portfolios as losses unlikely ever to be paid. That was up from 1.3 percent in August but down from 3.01 percent last year.

ELFA’s report, provided to Reuters a day ahead of its official release, was consistent with recent encouraging earnings reports from a number of top U.S. makers of capital equipment, including Caterpillar Inc (CAT.N: ), the world’s largest maker of construction and mining equipment, Illinois Tool Works (ITW.N: ), United Technologies Corp (UTX.N: ) and Eaton Corp (ETN.N: ).

ELFA’s members include Bank of America Corp (BAC.N: ), Canon Inc (7751.T: ) affiliate Canon Financial Services, 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 affiliate, among others.

(Reporting by James B. Kelleher, editing by Matthew Lewis)

Exclusive: Big gains in U.S. business borrowing, says ELFA