Confidence in Equipment Finance Market Increases in June

According to the Equipment Leasing & Finance Foundation‘s June 2023 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall, confidence in the equipment finance market is 44.1, an increase from the May index of 40.6.

“We believe that as banks’ senior credit facility lending tightens, there will be more opportunity for equipment lessors to supply supplemental capital. We are seeing evidence of this today,” Jonathan Albin, chief operating officer of Nexseer Capital, said.

When asked to assess their business conditions over the next four months, 3.3% of the responding executives said they believe business conditions will improve over the next four months, an increase from none in May. Most (73.3%) believe business conditions will remain the same over the next four months, up from 51.9% the previous month, while 23.3% believe business conditions will worsen, a decrease from 48.2% in May.

“Businesses need equipment to operate. While business expansion may be limited, the need to replace equipment will remain. Our credit criteria has not changed,” Charles Jones, senior vice president of 1st Equipment Finance (FNCB Bank), said.

According to the survey, 6.7% of respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 3.6% in May, while 66.7% believe demand will “remain the same” during the same four-month time period, an increase from 53.6% last month, and 26.7% believe demand will decline, down from 42.9% in May.

“The equipment leasing and finance industry is resilient and will weather the liquidity shortage that we are currently in, as well as the looming recession,” David Normandin, president and CEO of Wintrust Specialty Finance, said. “There are and will continue to be opportunities that exist in this environment, and nimble organizations that are capitalized will be well positioned to grow during this period of uncertainty.”

Just 6.7% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 10.7% in May, while 76.7% of executives indicated they expect the “same” access to capital to fund business, an increase from 75% last month. Meanwhile, 16.7% expect “less” access to capital, up from 14.3% last month.

When asked, 13.3% of the executives reported they expect to hire more employees over the next four months, a decrease from 17.9% in May. Most participants (76.7%) expect no change in headcount over the next four months, an increase from 67.9% last month, and 10% expect to hire fewer employees, down from 14.3% in May.

None of the leadership evaluated the current U.S. economy as “excellent,” unchanged from last month. Meanwhile, 83.3% of the leadership evaluated the current U.S. economy as “fair,” down from 85.7% in May, and 16.7% evaluated it as “poor,” an increase from 14.3% last month.

Only 6.7% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 3.6% in May, while 40% indicated they believe the U.S. economy will “stay the same” over the next six months, an increase from 32.1% last month. More than half (53.3%) believe economic conditions in the United States will worsen over the next six months, a decrease from 64.3% last month.

In June, 30% of respondents indicated they believe their company will increase spending on business development activities during the next six months, down from 35.7% last month, while 56.7% believe there will be “no change” in business development spending, up from 53.6% in May. Meanwhile, 13.3% believe there will be a decrease in spending, up from 10.7% last month.

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