ELFA data shows annual growth good but pace is slowing

The Equipment Leasing and Finance Association (ELFA) has released its annual survey of the sector, which shows that while growth is continuing, with new business volume up by 6.7% in the equipment finance industry in 2014, the pace has slowed compared with recent years.

The 6.7% rise marked the fifth consecutive year of spending increases, but is lower than the previous three years, which posted increases of 9.3% in 2013, 16.4% in 2012, and 16.5% in 2011. However, 2014’s growth in business volumes surpassed the 2.4% rate of growth for the US economy as a whole, and ELFA says in its commentary that this demonstrate the industry is back on track after posting just 3.9% in 2010, and a decline of 30.3% in 2009.

“We are pleased to present the 2015 Survey of Equipment Finance Activity (SEFA). This year marks the 40th anniversary of the report, which has grown over the years into the most important source of statistical information available on the $903 billion equipment finance industry,” said William Sutton, ELFA president and CEO.

“The data show that the equipment finance industry is healthy and growing, continuing an upward trend since the end of the Great Recession. More recent data collected in 2015 indicate that positive momentum is continuing, with member companies reporting solid new business growth and portfolio performance. We remain cautiously optimistic that demand for capital equipment will continue to drive positive growth for the equipment finance industry,” Sutton forecast.

Independents lead the way

ELFA’s analysis of the data reveals that independent equipment finance organizations led the industry in new business volume growth for a third straight year. Independents saw a 17.6% increase in new business volume, while banks saw their volume grow by 7.4% and captives saw a 1.3% increase.

New business volume varied by market segment, growing 9% in the small-ticket segment and 7.9% in the middle-ticket segment, and falling 2.4% in the large-ticket segment. The top-five most-financed equipment types were transportation, IT and related technology services, agricultural, construction and industrial/manufacturing equipment. The top five end-user industries representing the largest share of new business volume were services, agriculture, industrial/manufacturing, transportation and wholesale/retail.

ELFA’s report also shows assets under management grew 8.6%. Return on assets remained steady at a healthy 1.7%, unchanged since 2012. Net income increased 15.2%. Return on average equity decreased slightly, but remained strong at 16.6%. Overall, delinquencies remained steady. Full-year losses or charge-offs fell close to zero overall.

For the first time, the SEFA asked respondents about their use of electronic documents for funding new business volume, and found the majority (70%) reported some use of electronic documents.

ELFA also released a companion report to the 2015 SEFA called the 2015 Small-Ticket Survey of Equipment Finance Activity. The report found that new business volume in the small-ticket space grew by 7.1% in 2014.

The SEFA report is the broadest compendium of data on the US equipment finance industry, comprising a representative cross-section of equipment lease and loan origination by product, structure and origination, and is administered by PricewaterhouseCoopers LL. It is available at www.elfaonline.org/SEFA. ELFA is to host a one-hour web seminar on the SEFA findings on August 5.