Equipment Finance Confidence Eases in September Amid Election Concerns

According to the Equipment Leasing and Finance Foundation’s monthly confidence index, due to customers’ concerns about the November election, confidence in the equipment finance market fell to 53.8 in September from the 54.8 reading in August.

When asked about the outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, said, “It appears U.S. companies have put their plans for growth on hold pending the outcome of the presidential election. Capital investment levels continue at diminished levels. As such, the equipment finance industry will experience a reduction in new business volumes as compared to the last several years.”

When asked to assess their business conditions over the next four months, 18.8% of executives said they believe business conditions will improve over the next four months, an increase from 10.0% in August. However, the same percentage of respondents (18.8%) believe business conditions will worsen, an increase from 10.0% the previous month.

As for the demand for lease and loans to fund capital expenditures, 28.1% believe such demand will increase during the next four months, a marked increase from 13.3% in August. Meanwhile, 18.8% of respondents think demand will decline after 16.7% believed so in August.

“Is it good or is it bad? I think neither. In general the industry is motoring along at a steady pace,” said Harry Kaplun, president of Specialty Finance at Frost Bank. “Industries needing capital for expansion are few and most users of equipment financing are purchasing for replacement or efficiency reasons. Economic and political uncertainties are factors that will take months to understand, thus continuing to suppress capital spending.”

None of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 13.3% in August. That doesn’t mean executives think there will be less access. In fact, the majority (96.9%) of executives indicate they expect the same access to capital to fund business.

When asked, 21.9% of the executives report they expect to hire more employees over the next four months, a decrease from 40.0% in August. However, with a decrease to 6.3% who expect to hire fewer employers in the near term, the study reveals that most companies are expecting no change in headcount over the next fourth months.

Executives are neither bullish nor bearish on the U.S. economy, with 100% of respondents rating it as fair. With that, a small portion believes economic conditions will get better (6.3%), up from none in August. That is outweighed by the jumped to 18.8% in the number of respondents who believe conditions will worsen. That number was at 3.3% last month.

“Financial stress increasing in small business is producing increased delinquency and defaults. The U.S. economy is the best place to be, although under stress,” said David Normandin, managing director, Commercial Finance Group, Banc of California.

Finally, while there was only a minor change in the number of executives who plan on increasing spending on business development (40.6% from 40.0%), there was a 6.3% jump in the number who believe such activities will decrease for their firm.

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