ELFA reports 13% increase in new business volume

The Equipment Leasing and Finance Association (ELFA) has released its Monthly Leasing and Finance Index (MLFI-25) for July 2024, revealing a significant 13% year-over-year increase in new business volume (NBV).

The index, which aggregates data from 25 companies representing a cross-section of the US$1 trillion US equipment finance sector, reported that NBV reached US$11.1 billion in July, up from US$9.8 billion in the same month last year.

This positive trend is further underscored by a 5.5% year-to-date cumulative increase in NBV compared to the same period in 2023.

The MLFI-25 also presented data indicating a slight increase in financial stress within the sector. Receivables over 30 days rose to 2.5% in July, up from 2.0% in June and 2.3% in July 2023. Charge-offs, which represent the portion of receivables deemed uncollectible, grew by 0.5%, mirroring the previous month’s increase and marking a rise from 0.3% over the last 12 months.

Despite these challenges, credit approvals improved marginally, climbing to 75.8% in July from 75.0% in June. The sector also experienced a 3% increase in total headcount year-over-year, signalling continued confidence in the industry’s growth prospects.

ELFA President and CEO Leigh Lytle acknowledged the sector’s resilience while noting some caution.

“Our July MLFI report showed strength in demand amidst a slight deterioration in financial conditions,” Lytle said. “Originations grew by double digits from June, but bank activity slowed. Given that banks comprise more than half of equipment finance activity, their continued pullback and the ability of captives and independents to pick up the slack bears watching in future surveys.”

Lytle also emphasized the importance of monitoring credit quality, which has shown signs of deterioration. However, she remained optimistic about the second half of the year, particularly as the Federal Reserve considers easing monetary policy.

Amrita Patel, Head of Equipment Finance at Wells Fargo, echoed this sentiment, pointing to strong demand pipelines and the potential for further growth into 2025.

“The equipment finance sector continues to exhibit strength, with demand in the pipelines indicating growth appetite into 2025,” Patel said. She noted that potential interest rate cuts in September could further stimulate activity, particularly in equipment replacement and acquisition.

Patel also highlighted the varying approaches between smaller firms, which are cautiously evaluating costs, and larger companies, which are advancing through capital expenditure cycles and leveraging cash reserves in the current environment.