According to the recently released Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) by the Equipment Leasing & Finance Foundation, overall confidence in the equipment finance market is 47, a decrease from the March index of 50.3.
“I believe current market conditions present opportunities for our industry,” Jonathan Albin, chief operating officer of Nexseer Capital, said. “Businesses have to react to the risk of tightening credit markets. As a result, they will be more open to exploring alternatives and supplements to their senior lending facilities to finance capex and source liquidity, and that will lead to opportunities for lessors.”
When asked to assess their business conditions over the next four months, 11.1% of the executives responding said they believe business conditions will improve over the next four months, a slight increase from 10.7% in March. Meanwhile, 70.4% believe business conditions will remain the same over the next four months, up from 57.1% the previous month, and 18.5% believe business conditions will worsen, a decrease from 32.1 % in March.
“KeyBank clients continue to have the confidence in Key to meet their needs from a cash management and lending perspective,” Adam Warner, president of Key Equipment Finance, said. “While the economy has slowed, demand remains for financing important infrastructure and clean energy initiatives. We remain encouraged that as we move along 2023, Key Equipment Finance will continue to support capital equipment acquisitions, technology efficiency investments and, ultimately, a rebound in most of our sectors.”
In April, 3.7% 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 10.7% in March. However, 70.4% believe demand will “remain the same” during the same four-month time period, an increase from 67.9% in April, and 25.9% believe demand will decline, up from 21.4% in March.
According to the survey, 7.4% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 17.9% in March, while 77.8% of executives indicated they expect the “same” access to capital to fund business, an increase from 71.4% last month. In addition, 14.8% expect “less” access to capital, up from 10.7% in March.
When asked, 33.3% of the executives reported they expect to hire more employees over the next four months, a decrease from 35.7% in March, while 51.9% expect no change in headcount over the next four months, a decrease from 57.1% last month, and 14.8% expect to hire fewer employees, up from 7.1% in March.
None of the leadership evaluated the current U.S. economy as “excellent,” down from 3.7% in March, and 88.9% of the leadership evaluated the current U.S. economy as “fair,” unchanged from March. Meanwhile, 11.1% evaluated the current U.S. economy it as “poor,” an increase from 7.4% last month.
According to the survey, 7.4% of respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 3.6% in March, while 48.2% indicated they believe the U.S. economy will “stay the same” over the next six months, a decrease from 53.6% last month. In addition, 44.4% percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 42.9% in March.
“I think the general economy will have a downturn this year, which is why we are focused on credit quality and portfolio performance,” David Normandin, president and CEO of Wintrust Specialty Finance, said. “In this market change, opportunity exists and I am optimistic that Wintrust Specialty Finance is well positioned to step up to those opportunities.”
In April, 37% of respondents indicated they believe their company will increase spending on business development activities during the next six months, down from 39.3% last month, while 44.4% of respondents believe there will be “no change” in business development spending, down from 53.6% in March, and 18.5% believe there will be a decrease in spending, up from 7.1% last month.
