Equipment finance sector confidence up

Confidence in the US equipment finance market is on the up according to the latest research from the Equipment Leasing and Finance Foundation (ELFF), boosted by a more stable business environment and expectations of a traditional year-end buying push, but the longer term outlook appears mixed.

ELFF’s November Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), which is a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives, currently stands at 60.2, an increase from the October index of 58.7.

When asked about the outlook for the future, MCI-EFI survey respondent David Schaefer, CEO, Mintaka Financial, said: “The most recent positive job creation report and the resolution of the leadership struggles in the House of Representatives should equate to more optimism and less uncertainty for small business owners and decision makers. I am more optimistic about the business environment.”

More than one in five (22.2%) of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, unchanged from October. Two thirds (66.7%) believe demand will “remain the same” during that time, down from 70.4% the previous month. There has been a slight uptick in the numbers (11.1%) who believe demand will decline, up from 7.4% in October.

Most of those polled (92.6%) rate the current US economy as “fair,” up from 88.9% in October, and just 3.7% rate it as “poor,” a decrease from 7.4% the previous month. The number who believes that US economic conditions will get “better” over the next six months has more than doubled, up from 7.4% in October to 18.5% currently. The majority (77.8%) indicate they believe the US economy will “stay the same” over the next six months, unchanged from the previous month, and just a handful (3.7%) expect it to get worse.

Overall, three quarters (74.1%) of respondents believe business conditions will remain the same over the next four months, while 11.1% believe business conditions will worsen, an increase from 7.4% the previous month.

“Demand has stabilized and appears to be increasing as the traditional year-end push for last minute acquisitions occurs. Pressure continues on margin and I do not see that changing in the near term. The marketplace is flooded with capital and as the industry continues to show strong portfolio performance, I do not expect the profitability dynamic to change,” said Valerie Hayes Jester, president, Brandywine Capital Associates.

Dip in October new business volumes

Separately, figures from the Equipment Leasing and Finance Association (ELFA) show that overall new business volume for October from a representative sample of companies was down on the previous month, but the year to date performance is better than in 2014.

The association’s Monthly Leasing and Finance Index (MLFI-25) reports economic activity from 25 companies and shows their overall new business volume for October was $7.7 billion, down 8% from new business volume in October 2014, and also 8$ below the $8.4 billion recorded in September. However, year to date, cumulative new business volume increased 3% compared to 2014.

Receivables over 30 days were 1%, down from 1.1% the previous month and down from 1.26% in the same period in 2014. Charge-offs were 0.27%, unchanged from the previous month.

Credit approvals totaled 80.1% in October, down slightly from 80.5% in September.

ELFA president and CEO William Sutton said: “Performance in the equipment finance market was mixed in October: new business volume weakened somewhat—both in terms of the month- and year-earlier periods—while portfolio quality remained steady. Some members report a softening in the demand side of the business and it remains to be seen whether and to what extent the specter of rising interest rates will impact the sector. ”