Equipment finance sector confidence boost

With the US presidential election just days away, equipment finance industry leaders are reporting an uptick in business confidence and renewed expectations of a strong end to the year, according to the latest data from the Equipment Leasing and Finance Foundation.

The Foundation’s October 2016 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) shows that overall, confidence in the equipment finance market now stands at 56, an increase from the September index of 53.8, and the highest level since April. This is despite continued concerns about the November elections.

When asked about the outlook for the future, MCI-EFI survey respondent Frank Campagna, commercial equipment finance business line manager, M&T Bank Corporation, said: “We continue to see strong demand from our core commercial and industrial business throughout all regions of our footprint and via all finance product sets and asset classes. Our business optimism is tempered somewhat by the continued downward price pressure by some of our competitors, but that does not discount the fact that our customers are in the market and acquiring equipment.”

Improvement ahead

Campagna added: “Some sectors related to infrastructure, albeit softer than in years past—especially those related to energy—continue to provide equipment financing opportunity and are poised for some significant growth in 2017.”

The majority (81.8%) of those polled said they believe business conditions will remain the same over the next four months, an increase from 62.5% in September. Just 6.1% now believe business conditions will worsen – a decrease from 18.8% the previous month.

Similarly most (57.6%) believe demand for leases and loans to fund capital expenditures will “remain the same” during the same four-month time period, and a quarter (24.2%) of survey respondents expect demand to increase.

While virtually all respondents (93.9%) evaluate the current US economy as “fair,” that represents a decrease from 100% last month, and 6.1% now evaluate it as “poor,” an increase from none in September. Two thirds (69.7%) indicate they believe the US economy will “stay the same” over the next six months, a decrease from 75% the previous month.

Uncertainty

“Demand seems constant as businesses begin to wrap up their equipment acquisition plans for 2016. The elephant in the room is the elections. I believe the issues that are not being addressed may have significant ramifications for small to mid-size businesses in 2017. It is too early to tell, but the political climate is not adding to anyone’s confidence levels,” reported Valerie Hayes Jester, president, Brandywine Capital Associates.

Political uncertainties are likely to be resolved once the outcome of the election, due on November 8, is known. However Thomas Partridge, president, Fifth Third Equipment Finance, points out this is not the only factor which is weighing on the equipment finance sector.

“The rate environment continues to make financing equipment a good option for most companies. Concerns center around the impact of the election season. When the US raises rates it will negatively impact those companies reliant on exporting,” Partridge warned.