Modest, but not robust new business growth for US lessors in July

Overall new business volume for US lessors in July was $8.2 billion, up 4% from volume in July 2014.

The US Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25) revealed that although new business volume was down 14% from $9.5 billion in June, year to date, cumulative new business volume increased 8% compared to 2014.

Receivables over 30 days were 1.0%, down slightly from 1.1% the previous month and unchanged from the same period in 2014. Charge-offs remained at an all-time low of 0.2% for the 17th consecutive month.

Credit approvals totaled 79.0% in July, down slightly from 79.4% in June. Total headcount for equipment finance companies was up 5.4% year over year.

William G Sutton president and CEO of ELFA (pictured above) said: “The consensus forecast for the second half of 2015 is for the US to show modest, if not robust, economic growth. July MLFI-25 data provide evidence of this narrative, in terms of originations, credit quality and headcount.

“Despite economic headwinds in parts of Europe and China, as well as constant chatter about a looming interest rate hike by the Fed, US businesses in many sectors are investing steadily in productive assets, in the process relying on financing solutions for these equipment acquisitions. Hopefully, this trend continues for the balance of the year.”

Harry Kaplun, president, specialty finance, Frost Bank, said: “The MLFI-25 continues to support the strength in the equipment finance industry. Growing employment, minimal losses and high approval rates are all indicative of a favorable business climate.”

Settled economic scene boosts US lessors’ confidence

The US Equipment Leasing & Finance Foundation’s (ELFF) August 2015 Monthly Confidence Index reveals that overall, confidence in the equipment finance market is 67.4, rising sharply against the July index of 62.6.

When asked about the outlook for the future, Index respondent respondent Valerie Hayes Jester, president at Brandywine Capital Associates (pictured above), said: “Demand has stayed strong through the summer. The threats of potentially increasing interest rates and projects that have been delayed for too long have been principal motivators for our customers.

“I feel optimism is fuelled by economic conditions improving and by consumer sentiment that seems to echo that positive attitude.”

The August 2015 survey results:

• when asked to assess their business conditions over the next four months, 36.4% of executives responding said they believe business conditions will improve over the next four months, an increase from 17.2% in July;
• 40.9% of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, up from 20.7% in July. 59.1% believe demand will “remain the same” during the same four-month time period, down from 72.4% the previous month. None believe demand will decline, a decrease from 6.9% who believed so in July;
• some 31.8% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 20.7% in July. 68.2% of survey respondents indicate they expect the “same” access to capital to fund business, down from 79.3% in July. None expect “less” access to capital, unchanged from the previous month;
• when asked, 36.4% of the executives report they expect to hire more employees over the next four months, a decrease from 51.7% in July. 63.6% expect no change in headcount over the next four months, up from 48.3% last month. None expect to hire fewer employees, unchanged from July;
• 4.5% of the leadership evaluate the current US economy as “excellent,” a decrease from 13.8% last month. 95.5% of the leadership evaluate the current US economy as “fair,” up from 82.8% in July. None rate it as “poor,” a decrease from 3.5% the previous month;
• 27.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 24.1% who believed so in July. 68.2% of survey respondents indicate they believe the US economy will “stay the same” over the next six months, relatively unchanged from 69% in July. 4.5% believe economic conditions in the US will worsen over the next six months, a decrease from 6.9% who believed so last month. 
• In August, 54.5% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 48.3% in July. 45.5% believe there will be “no change” in business development spending, a decrease from 51.7% last month. None believe there will be a decrease in spending, unchanged from last month. 

Comments from industry executive leadership on the August 2015 survey:

Bank, Small Ticket

Kenneth Collins, CEO at Susquehanna Commercial Finance said: “Concerns still circle in Washington DC, on regulatory matters, as well as unrest around the world.”

Independent, Middle Ticket

William H Besgen, president & COO at Hitachi Capital America said: “I have concerns about the impact on people’s confidence from China’s devaluation of its currency and the decreasing price of oil—both deflationary—and the overhang of the Fed possibly raising interest rates in the near term.”

Bank, Middle Ticket

Thomas Jaschik, president at BB&T Equipment Finance said: “A rise in interest rates could force an uptick in economic activity. If so, the equipment finance industry could finish 2015 on a very strong note.”