Promising prospects for equipment finance industry

Latest figures from the Equipment Leasing and Finance Association (ELFA) indicate a strong start in the first quarter of the year for many lenders, with business volumes 25% higher in March than they were twelve months ago, and prospects looking good for the immediate future.

ELFA’s Monthly Leasing and Finance Index (MLFI-25), which reports lease and loan activity from a cross-section of 25 companies in the equipment finance sector, shows their overall new business volume for March was $8.9 billion. Volume was up 46% from $6.1 billion in February, while year to date, cumulative new business volume has increased 17% compared to 2014.

The data suggests that receivables over 30 days are creeping up a little and are now standing at 1.2%, up from 1.1% the previous month and from 1% the same period in 2014. Charge-offs were at an all-time low of 0.2% for the 13th consecutive month.

ELFA president and CEO William G. Sutton (pictured above), said: ‘The March new business volume is indicative of strong capital spending, influenced by businesses taking advantage of continued low interest rates, perhaps in anticipation of reported tightening of monetary policy by the Fed. Credit quality metrics are mixed, with delinquencies edging upward counterbalanced by monthly losses remaining at historic lows.’

Separately, the Equipment Leasing and Finance Foundation’s Monthly Confidence Index (MCI-EFI) for April now stands at 70.7, an easing from the March index of 72.1, which was the highest level in four years.

When asked about the outlook for the future, survey respondent Valerie Hayes Jester, president, Brandywine Capital Associates, said: ‘We have seen an increase in requests for equipment financing this month. We attribute this demand to increased confidence in the economy and potential concern that interest rates may begin to rise in the fourth quarter. Capital and credit windows are at historic points; business owners know that this time is a good one to invest.’

This view is borne out by the wider survey findings, with 48.2% of survey respondents saying they believe demand for leases and loans to fund capital expenditures will increase over the next four months, up from 41.7% in March.

However, overall there has been a slight drop in the number of executives polled who say they expect business conditions to improve over the next four months, falling from 50% in March to 44.4% currently, although none say they believe the outlook will worsen. Most (92.6%) rate the current state of the US economy as ‘fair’, up from 87.5% in March, but the proportion who assess it as ‘excellent’ has dropped from 12.5% to 7.4%.