According to the Equipment Leasing & Finance Foundation’s August 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 50, an increase from the July index of 46.1.
“The resilience of the equipment leasing and finance industry continues to demonstrate itself during 2022,” Dave Fate, CEO of Stonebriar Commercial Finance, said. “Over the decades, the industry has overcome and prospered through recessions, a financial crisis and a global health pandemic. We are all now faced with the challenges of supply chain disruption, inflation, labor shortages and the ‘noise’ that accompanies the upcoming midterm elections in a few months. Regardless of these challenges, the industry always performs well. Speaking on behalf of Stonebriar Commercial Finance, I am happy to report that SCF is on a record pace for new business volume and profitability this year, and our portfolio continues to perform exceptionally well.”
When asked to assess their business conditions over the next four months, 14.8% of executives said they believe business conditions will improve over the next four months, an increase from 3.7% in July, while 51.9% believe business conditions will remain the same over the next four months, down from 63% last month, and 33.3% believe business conditions will worsen, unchanged from July.
Only 7.7% 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 11.1% in July. Most respondents (76.9%) believe demand will “remain the same” during the same four-month time period, an increase from 55.6% last month, while 15.4% believe demand will decline, down from 33.3% in July.
“We have a number of large projects that will be closing by the end of the year, resulting in solid year-over-year growth. Many of these projects have been delayed due to supply chain issues from last year,” Michael Romanowski, president of Farm Credit Leasing, said. “The future is a bit cloudy, with talks of recession and inflation still running hot. That said, customers are still looking to lock in historically low rates to finance major capital investments.”
According to the index, 7.4% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 11.1% in July. Meanwhile, 85.2% of executives indicated they expect the “same” access to capital to fund business, an increase from 81.5% last month, and 7.4% expect “less” access to capital, unchanged from July.
When asked, 25.9% of the executives reported they expect to hire more employees over the next four months, up from 18.5% in July. At the same time, 74.1% expect no change in headcount over the next four months, a decrease from 77.8% last month. None of the respondents expect to hire fewer employees, down from 3.7% in July.
None of the leadership evaluated the current U.S. economy as “excellent,” a decrease from 11.1% last month. Instead, 85.2% of the leadership evaluated the current U.S. economy as “fair,” up from 77.8% in July, while 14.8% evaluated it as “poor,” an increase from 11.1% last month.
“The commercial equipment finance business remains strong and nimble. As we see elevated rates of inflation continue and the Fed continuing to raise rates, we will adapt and find solutions to meet our customers’ needs,” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said. “Through this period, I am thoughtful about portfolio performance and potential challenges that many of our customers will face. Staying focused on supporting our customers through changes is valuable for us to continue to grow.”
According to the index, 11.1% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 7.4% in July. Still, 51.9% indicated they believe the U.S. economy will “stay the same” over the next six months, an increase from 40.7% last month, while 37% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 51.9% last month.
In August, 29.6% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 22.2% the previous month. Meanwhile, 70.4% believe there will be “no change” in business development spending, down from 74.1% in July. None of the respondents believe there will be a decrease in spending, down from 3.7% last month.
“Growth opportunities remain significant for companies that understand their clients,” Alan Sikora, CEO of First American Equipment Finance, an RBC/City National Company, said. “As clients deal with uncertainty, equipment leasing and finance companies that are both sophisticated and creative will add value and thrive.”