In November, Suite by Monitor published 15 articles, covering the implications of a Trump Administration, Section 1071 of the Dodd-Frank Act, details about innovation and automation cycles in equipment finance, rising 10-year Treasury yields, QBRs and various outlooks for 2025. The highlights are as follows:
- The Innovation Paradox: Companies often strive for technological advancements to gain a competitive edge, yet frequently encounter recurring challenges that hinder sustained progress. These challenges include resistance to change, regulatory constraints and the complexities of integrating new technologies into existing systems. It’s imperative for equipment finance companies to learn from past experiences to effectively navigate the paradox of innovation and achieve long-term success in the industry.
- The Automation Imperative: Manufacturers are facing significant pressures due to rising input costs, labor shortages and increased competition, which threaten profitability. While automation offers a solution by enhancing productivity and reducing long-term expenses, the substantial initial capital investment required can be a major obstacle. Thus, creative financing solutions that enable manufacturers to adopt transformative technologies without straining their cash flow are of growing importance.
- Tariffs, Tax Cuts, Deregulation and Lower Interest Rates: The anticipated effects of the incoming president’s economic agenda, aimed at revitalizing U.S. manufacturing, combines tariffs to reduce dependence on foreign production, tax cuts to incentivize domestic investment, deregulation to ease operational constraints and lower interest rates to facilitate capital access. While these policies are expected to stimulate job creation and growth in sectors like automotive, technology and heavy manufacturing, they also present challenges such as increased production costs, potential trade tensions and supply chain disruptions. For equipment finance companies, this environment offers opportunities through heightened demand for new machinery and technology, but also necessitates navigating the associated risks.
- Section 1071 of the Dodd-Frank Act: Section 1071 mandates that financial institutions collect and report data on credit applications from small businesses, including those owned by women and minorities, to facilitate fair lending enforcement and identify discriminatory practices. The potential implications of this section for commercial equipment finance companies, particularly in light of regulatory changes anticipated under a potential Trump administration, include concerns about increased compliance costs and administrative burdens associated with data collection and reporting requirements. The Trump administration aims to roll back certain provisions of the Dodd-Frank Act, which could affect the implementation and enforcement of Section 1071.
- Rising 10-Year Treasury Yields & Rate Cuts: The Federal Reserve’s 2024 rate cuts have led to a unique financial environment where short-term interest rates have decreased, but the 10-year Treasury yield — a key benchmark for long-term borrowing — has risen significantly. This divergence poses challenges for commercial equipment lenders, who now face higher funding costs and shifting borrower behaviors. Navigating this landscape requires lenders to adapt their strategies to manage increased expenses and meet evolving client needs.
- Using QBRs and Big Data: Quarterly Business Reviews (QBRs) are underutilized in vendor finance, with only 22% of firms conducting them regularly in 2024. Among these, just 38% used big data to help vendors enhance business outcomes. By integrating big data into QBRs, equipment financiers can become essential partners, offering insights that drive vendor growth and profitability.
Last month, Suite also offered various outlooks and trends for 2025, such as the strong momentum of the private aviation market, a snapshot of capital expenditure, dynamics in the middle market, financing alternatives for dissatisfied equipment sellers and opportunities in the construction market.