ELFF: Equipment Finance Industry Confidence Hits All-Time High in April

Overall, confidence in the equipment finance market is 76.1, an all-time high and an increase from the March index of 67.7, according to the Equipment Leasing & Finance Foundation’s April 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI).

“We are starting to see pent-up demand for goods and services leading to expanded capital budgets for equipment to produce it and transportation to deliver it,” Aylin Cankardes, president of Rockwell Financial Group, said. “With favorable interest rates, businesses are increasing spending again to stay responsive in a rapidly evolving environment.”

When asked to assess their business conditions over the next four months, 73.3% of executives said they believe business conditions will improve over the next four months, up from 50% in March. Meanwhile, 23.3% believe business conditions will remain the same over the next four months, down from 46.4% the previous month, and 3.3% believe business conditions will worsen, unchanged from March.

“As vaccination levels continue to increase and confidence to re-enter social environments rises, increased spending will result,” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said. “This progression to a widening economy should serve to strengthen demand for commercial assets and the financing of those assets. We are optimistic that business will recover and yet are focused on managing the risk of those that are still highly impacted and will take additional time to find their footing.”

Most of the survey respondents (70%) believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 42.9% in March. The remaining 30% believe demand will “remain the same” during the same four-month time period, a decrease from 53.6% the previous month. None of the respondents believe demand will decline, down from 3.6% in March.

“We continue to see good demand for capital expenditures from the markets we serve. We have noticed tighter spreads as competition becomes more active,” Michael Romanowski, president of Farm Credit Leasing, said.

According to the index, 43.3% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 28.6% in March. More than half of executives (56.7%) indicated they expect the “same” access to capital to fund business, a decrease from 71.4% last month. None of the respondents expect “less” access to capital, unchanged from the previous month.

When asked, 43.3% of executives reported they expect to hire more employees over the next four months, up from 42.9% in March. Meanwhile, 56.7% of respondents expect no change in headcount over the next four months, a decrease from 57.1% last month. None of the respondents expect to hire fewer employees, unchanged from March.

This month, 13.3% of the leadership evaluated the current U.S. economy as “excellent,” an increase from 3.6% the previous month. Most of the respondents (80%) evaluated the current U.S. economy as “fair,” up from 78.6% in March, while 6.7% evaluated it as “poor,” down from 17.9% last month.

Overall, 73.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 60.7% in March, while 23.3% believe the U.S. economy will “stay the same” over the next six months, a decrease from 32.1% last month. In addition, 3.3% believe economic conditions in the U.S. will worsen over the next six months, down from 7.1% the previous month.

In April, 46.7% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 39.3% last month. Meanwhile, 53.3% believe there will be “no change” in business development spending, a decrease from 60.7% in March. None of the respondents believe there will be a decrease in spending, unchanged from last month.

“Early concerns are the new Biden tax plan and proposed changes to bonus depreciation. Optimistically, given the rebound in the economy, short-term demand for equipment finance should benefit,” Vincent Belcastro, group head of syndications for Element Fleet Management, said.

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