Equipment Finance Confidence Slumps Again in October

According to the Equipment Leasing and Finance Foundation’s October monthly confidence index for the equipment finance industry, confidence in the market was 58.7 in the month, dropping from 61.1 in September.

“Demand is consistent but not what we would have expected coming into the fourth quarter. We see many of our small business customers delaying purchases or putting the equipment acquisition decision through more evaluation than we had seen in the last year,” said MCI-EFI survey respondent Valerie Hayes Jester, president of Brandywine Capital Associates. “Margins are still under pressure given the amount of liquidity in the market. Portfolio performance continues to be strong.”

When asked to assess their business conditions over the next four months, 14.8% of executives responding said they believe business conditions will improve, a decrease from 22.2% in September. There was an increase in the number of respondents that believe business conditions will be the same, with 77.8% saying so compared to 70.4% in September. Additionally, 7.4% believe business conditions will worsen, which is unchanged from the previous month.

“I’m not as optimistic going into the fourth quarter as I was last quarter. We are seeing both strength and weakness in the economy and no particular sector is leading overall growth,” said David T. Schaefer, CEO of Mintaka Financial. “Combine this with the conflicts internationally and our nation’s leadership challenges, and I don’t have high expectations near term.”

As far as demand for leases and loans to fund capital expenditures, 22.2% of survey respondents believe demand will increase over the next four months, down from 29.6% in September.  A leveling off in demand is expected by most, with 70.4% believing demand will remain the same during the same four-month time period, up from 59.3% the previous month.

There was a decline in expectations in regards to access to capital to fund equipment acquisitions, with 22.2% of executives expecting more access over the next four months, down from 25.9% in September.

Confidence in the U.S. economy declined in October as well. Although 3.7% of leadership evaluated the U.S. economy as excellent, up from none last month, there was also a rise of nearly 4% in those respondents who categorized the economy as poor.

“While we have been optimistic about an improving economy, we have seen some recent signs of a potential slowdown, primarily in our transportation/truck business sales and credit applications,” said William H. Besgen, president and COO of Hitachi Capital America. “This business tends to lead the economy and so we are uncertain if this is an early sign of a potential slowdown in the U.S. economy.”

In October, 40.7% of respondents indicated that their company will increase spending on business development activities during the next six months, a decrease from 51.9% in September.  Congruently, 59.3% believe there will be no change in business development spending, an increase from 44.4% last month.

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