Tag Archive for 'Equipment Leasing & Finance Foundation'

Equipment Leasing and Finance Industry Confidence Up Again in December

The Equipment Leasing & Finance Foundation (the Foundation) releases the December 2019 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $900 billion equipment finance sector. Overall, confidence in the equipment finance market is 56.2, an increase from the November index of 54.9.

When asked about the outlook for the future, MCI-EFI survey respondent Valerie Jester, President, Brandywine Capital Associates, Inc.,  said, “We are experiencing a strong finish to the year and the fourth quarter. Given all the distractions of the national political stage I am a bit surprised. The tariffs that were imposed earlier in the year are having their effect on certain industries, but we continue to see good investment in equipment with the predominance of our customer base. I believe many have learned to tune out the ‘noise’ and focus on the necessities to compete in today’s markets. Waiting to make certain equipment investments is just not optional if you want to stay in the game.”

December 2019 Survey Results:
The overall MCI-EFI is 56.2, an increase from 54.9 in November.   

•   When asked to assess their business conditions over the next four months, 10.3% of executives responding said they believe business conditions will improve over the next four months, down from 13.3% in November. 82.8% of respondents believe business conditions will remain the same over the next four months, an increase from 73.3% the previous month. 6.9% believe business conditions will worsen, down from 13.3% in November.

•   10% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 13.3% in November. 76.7% believe demand will “remain the same” during the same four-month time period, an increase from 63.3% the previous month. 13.3% believe demand will decline, down from 23.3% in November.

•   20% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, 80% of executives indicate they expect the “same” access to capital to fund business, and none expect “less” access to capital, all unchanged from November.  

•   When asked, 30% of the executives report they expect to hire more employees over the next four months, an increase from 26.7% in November. 63.3% expect no change in headcount over the next four months, a decrease from 73.3% last month. 6.7% expect to hire fewer employees, up from none the previous month.

•   23.3% of the leadership evaluate the current U.S. economy as “excellent,” up from 16.7% the previous month. 76.7% of the leadership evaluate the current U.S. economy as “fair,” down from 83.3% in November. None evaluate it as “poor,” unchanged from last month.

•   13.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 10% in November. 80% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 76.7% the previous month. 6.7% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 13.3% in November.

•   In December, 23.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 30% last month. 73.3% believe there will be “no change” in business development spending, an increase from 63.3% in November. 3.3% believe there will be a decrease in spending, down from 6.7% last month.

December 2019 MCI-EFI Survey Comments from Industry Executive Leadership:

Independent, Small Ticket
“We’re more hopeful than optimistic that there is pent-up small business capital equipment demand that will release and spur increased financing volume. We wonder whether the trucking recession is the canary in a coalmine for future problems, or an isolated sector problem.” Quentin Cote, CLFP, President, Mintaka Financial, LLC,

Bank, Small Ticket
“Our volume, credit quality and portfolio performance have all remained strong. Economic indicators are positive. Moving into an election year and the uncertainty that comes with it may cause stagnation.” David Normandin, CLFP, President and CEO, Wintrust Specialty Finance

Bank, Middle Ticket
“Demand for financing within our core commercial & industrial loan business remains steady, and the pipeline is strong into the beginning of 2020 indicating continued pent-up demand for capital expenditures. Money costs remain at all-time lows, which may continue to fuel growth. Unemployment numbers continue to decline. Admittedly there is uncertainty in some sectors such as rail, but these seem to be cyclical in nature and focus primarily around energy. We do anticipate growth in the plastics sector to offset some of this.” Frank Campagna, Business Line Manager, M&T Commercial Equipment Finance

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers, and businesses are more apt to acquire more consumer goods, equipment, and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross-section of industry executives, including large-ticket, middle-market and small-ticket banks, independents, and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
1.   Current business conditions
2.   Expected product demand over the next four months
3.   Access to capital over the next four months
4.   Future employment conditions
5.   Evaluation of the current U.S. economy
6.   U.S. economic conditions over the next six months
7.   Business development spending expectations
8.   Open-ended question for comment

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/, included in the Foundation Forecast eNewsletter, and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

Equipment Leasing and Finance Industry Confidence Increases Again in March

The Equipment Leasing & Finance Foundation (the Foundation) releases the March 2019 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market increased in March for the second consecutive month to 60.4, up from the February index of 56.7.

When asked about the outlook for the future, MCI-EFI survey respondent Harry Kaplun, President, Specialty Finance, Frost Bank, said, “This year will continue to be prosperous as economic indicators are predicting. Business growth is spurred by low interest rates, favorable tax rates, and expansion-oriented investment.”

March 2019 Survey Results:
The overall MCI-EFI is 60.4, an increase from 56.7 in February.

•   When asked to assess their business conditions over the next four months, 20% of executives responding said they believe business conditions will improve over the next four months, up from 10% in February. 70% of respondents believe business conditions will remain the same over the next four months, a decrease from 83.3% the previous month. 10% believe business conditions will worsen, up from 6.7% who believed so the previous month.

•   23.3% of survey respondents believe demand for leases and loans to fund capital expenditures (CapEx) will increase over the next four months, an increase from 13.3% in February. 70% believe demand will “remain the same” during the same four-month time period, a decrease from 83.3% the previous month. 6.7% believe demand will decline, up from 3.3% who believed so in February.

•   13.3% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 20.7% in February. 86.7% of executives indicate they expect the “same” access to capital to fund business, an increase from 79.3% last month. None expect “less” access to capital, unchanged from last month.

•   When asked, 46.7% of the executives report they expect to hire more employees over the next four months, an increase from 26.7% in February. 46.7% expect no change in headcount over the next four months, a decrease from 56.7% last month. 6.7% expect to hire fewer employees, down from 16.7% last month.

•   36.7% of the leadership evaluates the current U.S. economy as “excellent,” 63.3% of the leadership evaluates the current U.S. economy as “fair,” and none evaluate it as “poor,” all unchanged for the second consecutive month.

•   6.7% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 13.3% in February. 80% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 70% the previous month. 13.3% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 16.7% in February.

•   In March, 33.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 20% last month. 66.7% believe there will be “no change” in business development spending, a decrease from 80% in February. None believe there will be a decrease in spending, unchanged from last month.

 

Equipment Leasing & Finance Foundation Presents 2019 Forecast

Equipment Leasing and Finance Association Announces Top 10 Equipment Acquisition Trends for 2019

ELFA Forecasts Generally Positive Economy and Solid Capital Investment with Building Headwinds and Moderated Growth by Year End

 The Equipment Leasing and Finance Association (ELFA) which represents the $1 trillion equipment finance sector, today revealed its Top 10 Equipment Acquisition Trends for 2019. Given U.S. businesses, nonprofits and government agencies will spend over $1.8 trillion in capital goods or fixed business investment (including software) this year, financing a majority of those assets, these trends impact a significant portion of the U.S. economy.

ELFA President and CEO Ralph Petta said, “Equipment acquisition plays a critical role in driving the supply chains across all U.S. manufacturing and service sectors. Equipment leasing and financing provide the source of funding for approximately 60 percent of U.S. businesses to acquire the productive assets they need to operate and grow. We are pleased to again provide the Top 10 Equipment Acquisition Trends to assist businesses with understanding the market environment and making their strategic equipment acquisition plans.”

ELFA distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2019 Equipment Leasing & Finance U.S. Economic Outlook, industry participants’ expertise and member input from ELFA meetings and conferences in compiling the trends.

ELFA forecasts the following Top 10 Equipment Acquisition Trends for 2019:

1.   Capital spending will remain in solidly positive territory. The first half of 2018 saw strong growth in equipment and software investment, driven by a healthy U.S. economy and more preferable tax treatment. Growth slowed in the second half of the year, providing a less robust jumping off point for 2019. After 7.9 percent growth in equipment and software investment last year, look for still healthy, though more moderate, 4.1 percent growth in 2019.
2.   The share of equipment acquisitions that are financed will likely remain stable.  Equipment leasing and finance will remain the most common payment method used by businesses to acquire equipment and software. The propensity of businesses to finance will continue despite rising interest rates, lower tax rates and a strong economy that’s resulted in many companies with cash on hand.
3.   A majority of key equipment verticals will have solid investment growth. Through the first half of 2019, many equipment verticals will build on or hold steady with the previous year’s positive investment gains, including aircraft, construction, computers, software, materials handling, and ships and boats. Equipment types likely to peak include agriculture, trucking, and medical equipment. Investment growth in some verticals may weaken this year as the business cycle matures further.
4.   U.S. businesses will feel the impact of global economic headwinds. U.S. firms will find conditions in international markets increasingly factoring into their own business decision-making in 2019. Slowdowns in China, in particular, Europe and other major emerging markets; the conflict in U.S.-China trade policy; and global credit tightening will be among the global effects that will drag on the U.S. economy and capital spending decisions.
5.   Leased and financed acquisitions will get a boost from regulatory and legislative changes. The combined impacts of changes in lease accounting standard ASC 842 and the new federal tax law have provisions that maintain, and in some cases improve on, previous benefits of financing, such as 100 percent bonus depreciation and expensing of used and new equipment. More precise balance sheet calculations for rating agencies lower capitalized asset costs vs. loan or cash purchase, and higher deductibility of interest expense are just a few of the new advantages.
6.   Technological advancements and avoiding obsolescence will be top priorities of capital spending. Equipment finance businesses across all industries will seek out new technologies for everything from enhancing the end-user experience to increase efficiencies to managing obsolescence. The ability of these organizations to successfully implement technologies like blockchain, artificial intelligence and robotics will continue to differentiate market leaders from also-rans.
7.   Innovations in equipment management will accelerate to meet the growing complexity of setting residual values. Faced with the globalization of markets and rapid technological developments that shorten industry cycles and rapidly shift asset values, equipment managers will deploy robust technology platforms and data analytics in combination with their industry expertise to provide residual values. End-users acquiring new and used equipment will benefit from stiff competition and enhanced customer service capabilities.
8.   Uncertainty around interest rate hikes will have eyes on Fed activity. Downgraded expectations from as many as five interest rate increases to two in 2019 will impact both equipment suppliers and end-users that seek funding. A softening global economy could further delay planned hikes. Regardless, businesses will stay tuned so they can plan accordingly.
9.   Federal government activity will pose opportunities and challenges to capital spending. As businesses continue to realize the benefits of federal deregulation, the results of how a divided Congress acts could dampen momentum. Political brinksmanship and dysfunction could make collaboration on legislation more challenging. Bipartisan cooperation could support a long-awaited infrastructure spending bill, but proposed legislation this year is still an unknown.
10.   External “wild cards” will factor into capital spending decisions. While the outlook for capital spending remains generally positive, there are additional areas businesses will keep an eye on for the potential to impact their equipment acquisition strategies. Modest to moderate growth forecast for business investment could decelerate if trade tensions and tightening credit conditions continue to erode business confidence. The oil sector has exposure to uncertainty resulting from numerous factors, including falling oil prices, surging U.S. production, and a cooling global economy. The weak housing sector shows no clear indications of a rebound as headwinds inhibiting growth remain. Finally, global developments including Brexit terms or the deteriorating economies of some of our trading partners could impact growth in equipment investment in the U.S.

For a video and an infographic highlighting the Top 10 Equipment Acquisition Trends for 2019, go to www.EquipmentFinanceAdvantage.org/rsrcs/articles/10trends.cfm.

More Information
ELFA has an informational website for businesses that want to learn more about how they can incorporate equipment financing into their business strategies. For resources about equipment financing, including a digital toolkit, videos, and infographics, go to www.EquipmentFinanceAdvantage.org.

For forecast data regarding equipment investment and capital spending in the United States, see the Equipment Leasing & Finance Foundation’s 2019 Equipment Leasing & Finance U.S. Economic Outlook at www.leasefoundation.org/industry-resources/u-s-economic-outlook/.

About ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $1 trillion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 575 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, please visit www.elfaonline.org.

Equipment Leasing and Finance Association’s Survey of Economic Activity: Monthly Leasing and Finance Index

UnknownNovember New Business Up 3 Percent Year-over-year, Down 13 Percent Month-to-month, Up 5 Percent Year-to-date

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $827 billion equipment finance sector, showed their overall new business volume for November was $6.6 billion, up 3 percent from new business volume in November 2012. Month-over-month, new business volume was down 13 percent from October. Year to date, cumulative new business volume increased 5 percent compared to 2012.

Receivables over 30 days were at 1.8 percent in November, up slightly from 1.5 percent in October.  Delinquencies declined from 2 percent in the same period in 2012.  Charge-offs declined to once again match the all-time low of 0.3 percent from 0.4 percent the previous month.

Credit approvals totaled 76.5 percent in November, a slight decrease from 77.6 percent the previous month.  Forty-seven percent of participating organizations reported submitting more transactions for approval during October, a level more in line with previous months’ activity after a spike to 82 percent last month.

Finally, total headcount for equipment finance companies was up 1.4 percent year over year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for December is 55.8, a decrease from the November index of 56.9, reflecting industry concerns over uncertainty regarding capital expenditures (capex) and competitive market pressures in 2014, among other issues.

ELFA President and CEO William G. Sutton, CAE, said: “Overall new business activity in the equipment finance sector continues to trend positively, despite some softness in November compared to late-summer and early-fall performance. Year-to-date volume also is encouraging as we head into the final month of the year, which is typically a strong period for the sector.  Fiscal pressures seem to be dissipating as well with the U.S. Congress agreeing on a two-year budget, which should lessen the chance of any potential government shutdown and provide a measure of comfort to U.S. businesses trying to make planning decisions for the coming year and beyond.  Credit quality continues its strong showing, notwithstanding a slight uptick in November delinquencies.”

Christopher Enbom, CEO and Chairman, Allegiant Partners Incorporated, said, “The continued growth in equipment finance from the previous year shows continued strength in the economy and in equipment spending.  The numbers are especially good considering the fact there were fewer working days in November 2013 than 2012.  We are expecting a strong 2014 in the small company segment we serve. The budget deal is increasing stability and has boosted our forecast for next year.”

About the ELFA’s MLFI-25

The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy:  equipment produced, acquired and financed.

The MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants is available below and also at http://www.elfaonline.org/Research/MLFI/

The Equipment Leasing & Finance Foundation is the non-profit affiliate to the Equipment Leasing and Finance Association, providing future-focused research to the equipment finance industry. For more information please visit the website at www.leasefoundation.org