US lessors “swing to the positive” as economy brightens

The US Equipment Leasing & Finance Foundation (ELFF) has revealed in its latest MCI-EFI survey, that confidence in the equipment finance market is 64.9, the highest confidence level in two years, and an increase from the December index of 55.8.  An improved general outlook for economic activity among industry leadership contributed to the increase.

When asked about the outlook for the future, MCI survey respondent David Schaefer, CEO, Mintaka Financial, LLC (pictured above), said: “We’re optimistic about 2014 as we follow from a very strong Q4.  The recent federal budget deal is positive since it takes some uncertainty out of the market.  Employment gains were also positive and this should bring more equipment demand and, therefore, financing opportunities. Margins are still being compressed as capital is abundant but demand remains fairly neutral.” 

January 2014 survey results:

• when asked to assess their business conditions over the next four months, 33% of executives responding said they believe business conditions will improve over the next four months, up from 12% in December.  61% of respondents believe business conditions will remain the same over the next four months, down from 78.8% in December.  5.6% believe business conditions will worsen, down from 9% who believed so the previous month;

• Some 36% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 15.2% in December.  61% believe demand will “remain the same” during the same four-month time period, down from 78.8% the previous month.  2.8% believe demand will decline, down from 9% who believed so in December;

• 25% of executives expect more access to capital to fund equipment acquisitions over the next four months, relatively unchanged from December. 75% of survey respondents indicate they expect the “same” access to capital to fund business, and no one expects “less” access to capital, both also unchanged from the previous month;

• when asked, 33% of the executives reported they expect to hire more employees over the next four months, an increase from 27.3% in December. 58.3% expect no change in headcount over the next four months, down from 60.6% last month.  8.3% expect fewer employees, down from 12% who expected fewer employees in December;

• 2.8% of the leadership evaluates the current US economy as “excellent,” down from 6% last month.  94.4% of the leadership evaluates the current US economy as “fair,” up from 85% last month.  2.8% rate it as “poor,” down from 9% in December;

• 41.7% of the of survey respondents believe that US economic conditions will get “better” over the next six months, an increase from 24.2% who believed so in December.  55.6% of survey respondents indicate they believe the US economy will “stay the same” over the next six months, a decrease from 66.7% in December.  2.6% believe economic conditions in the US will worsen over the next six months, a decrease from 9% last month;

• in January, 55.6% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 30.3% in December.  39% believe there will be “no change” in business development spending, a decrease from 66.7% last month.  5.6% believe there will be a decrease in spending, an increase from 3% who believed so last month.

January 2014 MCI survey comments from industry executive leadership:

Bank, Small Ticket
“December was the best origination month we’ve had in five years.  While January is experiencing the seasonal holiday hangover, small businesses seem now inclined to invest in capital equipment again.” Paul Menzel, president & CEO, Financial Pacific Leasing, LLC

Independent, Small Ticket
“I am optimistic that the economy seems to be gaining some momentum, even though there is still much uncertainty as it relates to the Affordable Care Act, congressional budgeting and Dodd-Frank.  Businesses have made up their minds to grow in spite of a less than nurturing regulatory environment.  The concerns I have are centered around risk/ return for the industry and an unclear view of the economy over the next 12- 24 months.” Valerie Hayes Jester, president, Brandywine Capital Associates, Inc.

Bank, Middle Ticket
“I am cautiously optimistic.  Customers have indicated that they will replace and slightly expand in 2014 to meet the additional needs of their customers.”  Elaine Temple, president, BancorpSouth Equipment Finance

Bank, Middle Ticket
“I believe the general outlook for economic activity has swung to the positive.  As a result, companies will likely begin to make substantial investments in the growth of their companies. 
The equipment finance market will benefit as a result of this increased investment.”  Thomas Jaschik, president, BB&T Equipment Finance