ELFA’s Survey of Equipment Finance Activity Reveals 7% Y/Y Decline in New Business Volume in 2020
JUL 19, 2021 - 6:50 am
According to Equipment Leasing and Finance Association’s 2021 Survey of Equipment Finance Activity, new business volume in the equipment finance industry decreased 7% year over year in 2020, marking the first time in a decade that businesses decreased their overall spending on capital equipment. However, the 7% decline was less than the double-digit drop that was expected as the COVID-19 pandemic gripped the world and transformed businesses.
“We are pleased to share the results of the 2021 Survey of Equipment Finance Activity,” Ralph Petta, president and CEO of the ELFA, said. “While 2020 certainly presented serious challenges, the equipment finance business, overall, showed remarkable resilience and durability, with the industry showing only a single-digit decline in year-over-year new business volume. This speaks to the strength of our industry, as it equips American businesses to succeed and prosper. As we look to the future, more recent data collected in the first two quarters of 2021 suggest that equipment finance activity should accelerate as overall conditions in the U.S. economy improve.”
The 2021 SEFA revealed COVID-19-pandemic-era impacts and key statistical, financial and operations information for the $900 billion equipment finance industry based on a survey of 104 equipment finance companies.
“We thank all the ELFA members who participated in the 2021 SEFA, without whom this leading industry data source would not be possible,” Bill Choi, vice president of research and industry services for the ELFA, said. “We encourage all members to review the data and put it to work for you. If you have any questions about benchmarking your company, using our interactive dashboard or other SEFA tools, please don’t hesitate to reach out.”
New business volume decreased in 2020 after 10 consecutive years of growth. Following declines in new business volume in 2008 and 2009 during the Great Recession, volume increased year-over-year each year from 2010 through 2019.
By organization type, banks experienced a 10.3% decrease in new business volume, captives experienced a 1.6% decrease and independents experienced a 2.5% increase. By market segment, new business volume dropped 14.6% in the large-ticket segment and 9.2% in the middle-ticket segment, while the small-ticket segment maintained its new business volume levels.
From an asset perspective, the top five most-financed equipment types were IT and related technology services, transportation, construction, agricultural and industrial/manufacturing. The top five end-user industries representing the largest share of new business volume were services, agriculture, industrial and manufacturing, wholesale/retail and construction.
Use of electronic documents increased significantly in 2020 compared with 2019 as the adoption of digital tools rose during the pandemic. The share of respondents who used electronic documents to fund at least some of their new business volume grew from 52% to 72%.
Delinquencies rose 30 basis points overall to 2.3%. Companies contacted customers early in the pandemic and devised individual deferral plans, keeping receivables current during the COVID-19 shutdowns so that delinquencies would not spike sharply.
Charge-offs also increased marginally overall to 0.48% of average receivables in 2020.
Credit approvals remained steady year over year, as did the percentage of approved applications booked. Although the percentages remained steady, there was a sharp decrease in both the number of applications and dollar volume from 2019 to 2020.
Employment declined slightly (by 1.75%). Despite COVID-19 restrictions, respondents seemingly made adjustments so that remote working did not result in significant declines in employment.
In addition to the 2021 SEFA, ELFA released the 2021 Small-Ticket SEFA, which focuses on small-ticket and micro-ticket equipment transactions among SEFA respondents. The report found that new business volume in the small-ticket space declined by 4.9% in 2020.
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