In a context of high interest rates, exchange rate volatility and pre-election uncertainty, advancing in an investment plan becomes an almost impossible mission. In the face of the crisis and a historically small capital market, there are companies that start looking sideways at other types of financing.
One of them is leasing, an instrument in which a donor provides a good so that a policyholder can use it by paying a fee. At the end of the contract, the latter has the option to buy it, paying a price called "residual", which is calculated according to:
- The difference between the original agreed value (plus interest and expenses)
- The amounts already paid by who made usufruct of the good
Perhaps the most common case is that of the cars: a person can use it even if he is not the owner and, month by month, he pays the fees established by the contract. In the end, you have the option to disburse the residual value and keep the vehicle or apply that amount to a new model.
However, this system is used for a much wider universe, ranging from financing a machine for the field to a solar panel for a renewable energy plant.
Why is it convenient for companies?
Germán Magnoni, Product and Communications Management at Supervielle Bank, explains to iProUP that the best known leasing benefits for SMEs are tax and financial:
- Get a good without immobilizing capital
- Canon deductible from Income Tax
- VAT apportionment during the term of the operation
- Payment of the fee from the delivery of the asset
- Flexible rates, fixed or variable
- Deadlines that may be longer than traditional, as they are associated with the useful life of the good
In the negotiation with each client the payment of a lower rate can be agreed. For example, a company that takes the loan yields the payroll of its employees to the bank (donor), thus reducing financing and the entity increases the number of customers.
"These types of agreements can be sealed only through leasing, as there are three parties involved: the supplier of the good, the giver who finances and delivers the asset and the policyholder, who pays a fee," explains Magnoni.
Also, depending on the case, there are operations in dollars that can be agreed with a better interest rate.
Today in Argentina, the ranking is led by the Investment and Foreign Trade Bank (BICE), with a portfolio balance of more than $ 5,000 million, 30% higher than the company located in second place, according to data from the Argentine Leasing Association .
The entity, chaired by Francisco Cabrera, also ranked first last year, at the end of 2018 with a portfolio balance of $ 4,894 million and loans that reached $ 3,800 million.
"With this type of financing we enhance the competitiveness of companies, with tools to modernize their machines, equipment and trucks, which is essential to boost national productive development," says Cabrera, former Minister of Production of the Nation.
BICE is a second grade public bank. That is, its shareholder is the national State and its focus is to promote investments and foreign trade through medium and long-term loans.
At a slow pace, but firm
Although the lease represents a smaller portion of the total credit to the private sector by the financial sector, the statistics show a steady increase. According to the Argentine Leasing Association:
- The portfolio almost doubled in the last three years. The last updated balance (March 2019) amounted to almost $ 32,000 million, when in 2016 it was $ 16,600 million. Further back in time, the figure did not reach $ 4,000 million
- The transport sector leads with 32%, followed by cars (16%), industrial equipment (14%) and construction machinery (13%)
- Another novelty is its greater use in the field of technology and telecommunications, which reached 13% of the total, equaling that of construction machinery
- Small and medium enterprises are the ones that use it the most (48%), in front of the large companies (42%). Far behind are the public sector (8%) and individuals (2%)
Despite its growth in the last decade, this instrument was also affected by the fall in investment, given a context of high interest rates, low consumption and economic crisis.
Although the evolution of the portfolios has been growing steadily since 2009, the peak was recorded at the end of 2018. The latest figure, from March this year, shows a slight decrease of less than 1 percent.
"In 2017 we had an explosion in the market driven by road machinery, public works and the most simplified processes. We were coming from years of divestment due to the difficulty of turning dollars abroad and all the procedures that were with DJAIs," he explains to iProUP Hernán Bernat, president of the Argentine Leasing Association (ALA).
The growth had a brake in mid-2018 with the exchange rate run and the mega devaluation.
"Today the lease went down because there is a direct correlation with the economic situation. It is difficult for a company to invest in a scenario of exchange rate volatility, high rates, falling demand, merchandise overstock and a Leliq that offers up to 70%" Bernat adds.
However, the picture is not entirely daunting. The manager cites the case of the HSBC bank, which in June announced loans for $ 1.8 billion for SMEs for the discount of checks, payment of bonuses and leasing operations.
"I was skeptical because there was no demand for capital goods. But the quota flew. There is demand," adds Bernat, who in addition to presiding ALA, works at HSBC.
Cars, software and even cows
The 32% that monopolize the transport sector has its explanation: logistics, historically, has had a high participation, for the financing of trucks, forklifts and utilities. Vehicles and capital goods are the other traditional items. However, today, newer ones are emerging.
"With the favorable environment of 2017, policyholders wanted to finance everything with leasing, so we had to start innovating," says the head of ALA. Among these innovations, there were cases of leasing of cattle, barrels for the wine industry and solar panels for the renewable energy sector.
Bernat highlights the growth that the technology area is experiencing, since it is used for the purchase of computers, operating systems and software. This is explained by the growing need of companies to add resources of this type but, once added, have to replace them with the obsolete.
In addition, there are important players, such as the company HP, which finance in dollars. With the 100% devaluation of 2018, the same portfolio in that currency doubled in pesos.
This instrument registered a global growth of 16.6% in the volume of new businesses, accompanied by a wave of technological innovations that are adding new bankable capital goods, according to the 2019 World Leasing Yearbook.
The most sophisticated leasing companies began using artificial intelligence, big data, machine learning and chatbots to customize customer service and, at the same time, predict their future demands. In addition, the technology simplifies and automates processes to reduce approval times, through the use of electronic signatures and digital data loading.
A little known tool
Beyond the current economic situation, the use of this instrument is limited by the lack of knowledge. This coincides with both leasing experts and different entrepreneurs from the Argentine Confederation of Medium Enterprises (CAME) consulted by iProUP.
The Leasing Law, which details the type of contract, guarantees and tax aspects, is not even 20 years old, since it was sanctioned in 2000.
From CAME they affirm that "teaching must be done because of the lack of knowledge there is." In this sense, Pedro Cascales, SME entrepreneur of the railway industry and spokesperson for CAME, says: "In a normal situation, leasing is super valuable, especially from the tax point of view. The problem is that with this level of fees companies don't want to borrow. "
"As it is not known, it is not demanded so much," adds Cascales, who says that from the entity they have a financing department to assist the various cameras on the available tools.
What they notice in that sector of the Confederation is that microenterprises, in which everything is resolved by an accountant - both the financial part, as fiscal and labor -, it is difficult for them to know how this alternative works. Different is the case of medium-sized firms, where there is a structure and a sector in charge of seeking financing options.
"When we are going to teach, the microenterprises only ask us how much the rate is and, if it closes, they go forward. The medium-sized companies, with another structure, also ask for the amortization, the grace period or if they can take a fee like National tax relief. They may consider other variables that also have benefits, "they conclude from CAME.
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