Stronger demand boosts confidence for US lessors as investment rises

When asked about the outlook for the future, survey respondent Valerie Hayes Jester, president, Brandywine Capital Associates, Inc., said: “We are experiencing stronger demand than in the past several months, which bodes well for a strong fourth quarter.  There is still concern for yield erosion, but we look forward to concluding the year on a positive trend.”

When asked to assess their business conditions over the next four months, 36.4% of executives said they believe business conditions will improve over the next four months, up from 18.2% in August. 

Some 30.3% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 21.2% in August.  66.7% believe demand will “remain the same” during the same four-month time period, down from 75.8% the previous month.  3% believe demand will decline, unchanged from August.

15.2% of executives expect more access to capital to fund equipment acquisitions over the next four months, unchanged from August – while 84.8% of survey respondents indicate they expect the “same” access to capital to fund business.

When asked, 30.3% of the executives reported they expect to hire more employees over the next four months, a decrease from 33.3% in August.  60.6% expect no change in headcount over the next four months, up from 57.6% last month.  9.1% expect fewer employees, unchanged from August.

US economy only “fair”

6.1% of the leadership evaluates the current US economy as “excellent,” unchanged from last month.  87.9% of the leadership evaluates the current US economy as “fair,” and 6.1% rate it as “poor,” both also unchanged from August.

27.3% of the survey respondents believe that US economic conditions will get “better” over the next six months, a decrease from 30.3% who believed so in August.  66.7% of survey respondents indicate they believe the US economy will “stay the same” over the next six months, unchanged from August. 

In September, 15.2% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 21.2% in August.  84.8% believe there will be “no change” in business development spending, an increase from 78.8% last month.  None believe there will be a decrease in spending, unchanged from last month.

Comments from industry executive leadership:

Bank, Middle Ticket

Elaine Temple, president, BancorpSouth Equipment Finance (pictured): “Businesses are beginning to invest in new equipment to increase capacity, not just to replace aging equipment.  For the past two years the majority of purchases were replacement, not expansion. The recovery continues to be slow.”

Captive, Small Ticket

Anthony Pacchiano, vice president and general manager, ADP Commercial Leasing said:  “Equipment replacement and cloud financing should drive demand.  The regulatory environment will increase burdens on lending/leasing activities.”

Bank, Small Ticket

Paul Menzel, president and chief executive officer, Financial Pacific Leasing: “While the consumer and commercial sectors are still suffering a hangover from the great recession, even after five years, the aversion to debt will slowly succumb to the need to upgrade and replace equipment.”

Bank, Middle Ticket

Thomas Jaschik, president, BB&T Equipment Finance: “As we approach the fourth quarter I am hopeful an improving economy collides with our typical seasonal upswing in new business activity. If this occurs our industry will finish the year with very strong results and a positive outlook for 2015.”