ELFF: Equipment Finance Industry Confidence Rises in November

According to the Equipment Leasing & Finance Foundation’s November 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 64.6, an increase from the October index of 61.1.

“While I believe the equipment leasing and finance Industry will always perform well through various cycles, the last few months have shown a number of interesting data points,” Dave Fate, CEO of Stonebriar Commercial Finance, said when asked about the outlook for the future. “Strong corporate earnings continue to drive the equity markets. The current rise in Inflation rates is alarming and seems like it will be with us for a while. Continued issues with the lack of skilled and non-skilled labor are the No. 1 concern of most of our customers. Supply chain issues are causing real disruption and seem to have no viable plan to alleviate them. The rest of Q4 and into Q1 will be very interesting as we navigate through year-end closing in our industry and the Christmas holiday season.”

When asked to assess their business conditions over the next four months, 34.6% of executives said they believe business conditions will improve over the next four months, up from 25.9% in October. Meanwhile, 46.2% believe business conditions will remain the same over the next four months, down from 70.4% in October, and 19.2% believe business conditions will worsen, up from 3.7% in October.

Of those surveyed, 42.3% believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 22.2% in October. In contrast, 50% believe demand will “remain the same” during the same four-month time period, a decrease from 74.1% in October, and 7.7% believe demand will decline, up from 3.7 in October.

“We continue to see interest in capital expansion for the sectors we serve, especially with middle market customers. Supply chain issues continue to be a headwind to the implementation of capital investment,” Michael Romanowski, president of Farm Credit Leasing, said.

In November, 26.9% of the respondents said they expect more access to capital to fund equipment acquisitions over the next four months, up from 14.8% in October. The majority (73.1%) of executives indicated they expect the “same” access to capital to fund business, a decrease from 85.2% last month. None expect “less” access to capital, unchanged from last month.

“Business owners are feeling much more confident and are moving forward with capital acquisitions, some that had been delayed because of the pandemic. Pending no flare-up of COVID-19 infections in the coming months, we expect smooth sailing for the next several quarters,” Bruce J. Winter, president of FSG Capital, said.

When asked, 53.9% of the executives said they expect to hire more employees over the next four months, up from 40.7% in October. Meanwhile, 46.2% expect no change in headcount over the next four months, a decrease from 59.3% last month. None expect to hire fewer employees, unchanged from October.

A total of 15.4% of the leadership evaluated the current U.S. economy as “excellent,” an increase from 7.4% the previous month. Most of the leadership (80.8%) evaluated the current U.S. economy as “fair,” down from 81.5% in October, while 3.9% evaluate it as “poor,” down from 11.1% last month.

Nearly a quarter (23.1%) of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 22.2% in October, while 57.7% believe the U.S. economy will “stay the same” over the next six months, a decrease from 63% last month. At the same time, 19.2% believe economic conditions in the U.S. will worsen over the next six months, up from 14.8% last month.

In November, 42.3% of respondents said they believe their company will increase spending on business development activities during the next six months, down slightly from 42.9% last month. More than half (57.7%) believe there will be “no change” in business development spending, up slightly from 57.1% in October. None believe there will be a decrease in spending, unchanged from last month.

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