Rocky road for equipment finance sector

Latest data from the Equipment Leasing and Finance Association (ELFA) suggests the equipment and asset finance industry has had a shaky start to the year, with new business volumes dipping and growing unease about prospects for the next 12 months.

ELFA’s monthly leasing and finance index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the sector, showed overall new business volume for January fell 12% compared to 2015, totalling $6 billion.

Volume was down 52% from $12.5 billion in December, following the typical end-of-quarter, end-of-year spike in new business activity.

Receivables over 30 days were 1.3%, up from 1.1% the previous month and up from 1.1% in the same period in 2015. Charge-offs were 0.26%, down from 0.41% the previous month.

ELFA president and CEO Ralph Petta said: “With annual volume down slightly and credit quality mixed, January MLFI-25 metrics mirror the volatility we are seeing in the equity markets both here and abroad. Despite favorable signs in the labor and housing markets, business confidence appears somewhat shaky, translating to uneven capex in certain verticals and equipment finance sectors.”

Confidence dip

Meanwhile, the Equipment Leasing and Finance Foundation’s Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) has also taken a dip, coming in at 48.3 in February, with uncertainty on various fronts cited for the decrease from the January index of 54.

Just 3.2% of respondents now believe business conditions will improve over the next four months, a decrease from 10.7% in January. The proportion of those who think business conditions will worsen has more than doubled, up from 10.7% at the start of the year to 25.8% currently.

There has also been a hike in the number of respondents who say demand for leases and loans to fund capital expenditures is likely to decline over the next quarter, which now stands at 35.5% compared to 17.9% in January. Those who believe demand will increase has dropped from 10.7% to 3.2%.

Currently, 6.5% of the survey respondents believe that US economic conditions will get “better” in the next six months, an increase from 3.6% who believed so in January. Two thirds (67.7%) indicate they believe the US economy will “stay the same”, a decrease from 75% the previous month, while a quarter (25.8%) believe economic conditions will worsen.