ELFA says 2015 finished well for leasing industry

Latest data from the Equipment Leasing and Finance Association (ELFA) suggest that while 2015 ended on an upbeat note for the equipment finance industry, 2016 is likely to prove a little more uncertain.

ELFA’s Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the sector, showed their overall new business volume for December was $12.5 billion, down 5 % from new business volume in December 2014.

Volume was up 105% from $6.1 billion in November. Cumulative new business volume for 2015 was relatively flat with 2014, rising 0.4%.

Receivables over 30 days were 1.1%, unchanged from the previous month and up from 0.96% in the same period in 2014. Charge-offs were 0.4%, up from 0.30% the previous month.

Credit approvals totaled 80.2 percent in December, up from 79.0 percent in November. Total headcount for equipment finance companies was up 3.% year over year.

ELFA president and CEO Ralph Petta said: “With another strong year end, MLFI-25 participants managed to eke out positive growth for the year. However, credit losses inched up during the month, showing some softness in portfolio quality.”

Petta went on to observe: “Now that the Fed has taken a first step toward higher long-term rates and with rock-bottom low oil prices giving way to sluggish fourth quarter growth in the US economy, it will be interesting to see how the equipment finance sector responds in early 2016 and throughout the winter months.”

Confidence dip

Separately, the Equipment Leasing and Finance Foundation’s Monthly Confidence Index (MCI-EFI) for January dropped back somewhat to 54, easing from last month’s index of 60.2.

When asked to assess their business conditions over the next four months, 10.7% of executives responding to the survey said they believe business conditions will improve over the next four months, a decrease from 12.5% in December. Over threequarters (78.6%) of respondents believe business conditions will remain the same over the next four months, an increase from 75.0% in December.

The proportion of survey respondents expecting demand for leases and loans to fund capital expenditures has risen to 10.7%, up from 8.3% in December, but there has also been a corresponding increase in those who believe demand will decline. This now stands at 17.9% compared to 12.5% who believed so in December.

One of the survey participants, Valerie Hayes Jester, president, Brandywine Capital Associates, said: “Our year-end close was strong, but I worry—now that the new year has begun and China’s woes are affecting our stock market—just how this year will unfold. I still see small-business customers concerned about making non-essential equipment purchases and taking longer than normal to make decisions. The tax incentives that were reinstated and extended at the close of 2015 may help tip the scales in favor of investment.”