ELFF: Confidence Improves Even as Washington Chaos Continues

According to the latest monthly confidence index from the Equipment Leasing & Finance Foundation, confidence in the equipment finance market is 64.4 in August, up from 63.5 in the previous two months.

When asked about the outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, said, “The political dysfunction in Washington continues to stifle the U.S. economy. Despite this lack of leadership, the equipment finance industry has experienced solid growth in 2017. However, with some action on tax and regulatory reform the economy and equipment finance industry could greatly accelerate.”

When asked to assess their business conditions over the next four months, 38.2% of executives said they believe business conditions will improve over the next four months, an increase from 30.3% in July. The other 61.8% believe business conditions will remain the same over the next four months, a decrease from 69.7% in July.

“The pricing environment remains very favorable for lessees. There are concerns about lack of progress in Washington surrounding tax policies,” said Thomas Partridge, president of Fifth Third Equipment Finance.

More than one third (38.2%) of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 39.4% in July.  Meanwhile, 58.8% believe demand will remain the same during the same four-month time period, up from 57.6% the previous month. The percentage of respondents who believe demand will decline (2.9%) remained relatively unchanged from July.

“We are seeing continued steady demand with our customers mostly seeking to finance replacement equipment rather than for expansion plans. The ‘chaos’ in Washington gives no confidence to the small business owner who needs to gain a better sense of the future in order to invest in hiring and equipment,” said Valerie Hayes Jester, president of Brandywine Capital Associates.

There was a 2.5% increase in the number of respondents who expect more access to capital to fund equipment acquisitions over the next four months, with a reading of 17.7% in August. The other 82.4% of executives indicated that they expect the same access to capital to fund business, down from 84.9% last month.

When asked, 41.2% of the executives report they expect to hire more employees over the next four months, an increase from 33.3% in July. A majority (55.9%) expect no change in headcount over the next four months, a decrease from 66.7% last month, while 2.9% expect to hire fewer employees, an increase from none in July.

All survey responders rated the current U.S. economy as fair and 76.5% believe economic conditions will remain the same over the next six months.

“The economic and business positives far outweigh any negatives about the near-term future of the equipment finance industry,” said Harry Kaplun, president of Specialty Finance at Frost Bank.

In August, 38.2% of respondents indicated that they believe their company will increase spending on business development activities during the next six months, an increase from 36.6% in July. In addition, 58.8% believe there will be no change in business development spending, down from 63.6% the previous month, and 2.9% believe there will be a decrease in spending, an increase from none last month.

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