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By Michael S. Long, Ph.D and Ben J. Sopranzetti, Ph.DNovember 2002
This study examines the factors that influence the use of leasing by small privately-held companies (i.e., what are the characteristics of small firms that make them more likely to use leasing relative to other financing alternatives). In particular, whether the use of leasing changes as firms mature with age and size, both of which lower the monitoring costs associated with a common alternative to lease financing: straight debt financing. The study also examines the impact of ownership structure, managerial experience, and credit rating on the firm's propensity to use lease financing. The results of the study should give lessors a better understanding of the types of small firms that use lease financing, and consequently should allow them to more effectively market their products to this large pool of potential clients.