According to the Equipment Leasing and Finance Association’s Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross-section of the $1 trillion equipment finance sector, overall new business volume in the industry for July was $9.9 billion, down 2% year over year. In addition, volume in July was down 9% from $10.9 billion in June, while 2023 cumulative new business volume through July was up 1.3% compared with the same time period in 2022.
Receivables more than 30 days were 2.3%, up from 1.8% in June and up from 1.6% during July 2022. Charge-offs were 0.32%, down from 0.37% in June and up from 0.18% in July 2022.
Credit approvals totaled 75.3%, down from 76.1% in June. Total headcount for equipment finance companies was down 2.1% year over year in July.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in August is 50.4, an increase from the July index of 46.4.
“In the current relatively high interest rate environment in which the industry finds itself this summer, new business volume is holding up pretty well for the month of July,” Ralph Petta, president and CEO of the ELFA, said. “However, compared to the same period last year, respondents to the MLFI are reporting some softness. This coincides with expectations by economists that overall investment in equipment and software will slow down in the second half of 2023. Is this the canary in the coal mine indicating a modest recession is around the corner? Only time will tell. But, in the meantime, equipment finance companies will continue doing what they always do: provide necessary capital to businesses seeking to acquire productive assets to run their businesses.”
“Rising interest rate environments will slow consumer spending. Cheap money notes that begin to expire will be replaced by more expensive money, and I expect new investments will be reduced,” Craig Ault, chief revenue officer at Honour Capital, said. “These are excellent conditions for companies with expiring portfolios. Proposing a diversified capital structure will provide company flexibility. We have reason to be optimistic because equipment finance remains an attractive solution for borrowers and lenders. It is worth repeating that fair market value leases provide a flexible solution that reduces monthly payment.”
