Equipment Finance Industry Confidence Rises in February
FEB 18, 2021 - 6:46 am
According to the Equipment Leasing & Finance Foundation’s February 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 64.4, an increase from the January index of 59.6.
“Although we believe the 2021 PPP program will suppress capital needs for a short period of time among SMBs, we’re expecting a positive rebound from a year’s worth of pent-up pandemic demand,” Brad Peterson, CEO of Channel Partners Capital, said. “Our post-pandemic portfolio looks fantastic and we expect the strong performance to continue through 2022. We believe this is the time to invest in SMB marketplace opportunities.”
When asked to assess their business conditions over the next four months, 46.2% of executives said they believe business conditions will improve over the next four months, up from 33.3% in January. Meanwhile, 46.2% believe business conditions will remain the same over the next four months, a decrease from 59.3% the previous month, and 7.7% believe business conditions will worsen, a slight increase from 7.4% in January.
In February, 42.3% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 33.3% in January. At the same time, 53.9% believe demand will “remain the same” during the same four-month time period, a decrease from 59.3% the previous month, while 3.9% believe demand will decline, down from 7.4% in January.
“We are seeing pent-up demand for equipment and structure investment. Due to the continued uncertainty caused by COVID and the low interest rate environment, customers are preferring to finance rather than pay cash,” Michael Romanowski, president of Farm Credit Leasing, said.
The ELFF found that 23.1% of respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 18.5% in January. The majority of respondents (76.9%) expect the “same” access to capital to fund business, a decrease from 81.5% last month, while no respondents expect “less” access to capital, unchanged from the previous month.
When asked, 38.5% of the executives said they expect to hire more employees over the next four months, up from 25.9% in January. Meanwhile, 61.5% expect no change in headcount over the next four months, a decrease from 66.7% last month. No respondents said they expect to hire fewer employees, down from 7.4% in January.
None of the leadership evaluated the current U.S. economy as “excellent,” unchanged from the previous month. Most of the leadership (76.9%) evaluated the current U.S. economy as “fair,” down from 77.8% in January, while 23.1% of leadership evaluated it as “poor,” up from 22.2% last month.
Exactly 50% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 51.9% in January. Meanwhile, 38.5% believe the U.S. economy will “stay the same” over the next six months, an increase from 37% last month. In addition, 11.5% believe economic conditions in the U.S. will worsen over the next six months, up slightly from 11.1% the previous month.
“The equipment finance and leasing marketplace has always been resilient and performs well in market dislocation. I have concerns around the unknown impact of numerous executive orders as well as COVID-19,” Dave Fate, president and CEO of Stonebriar Commercial Finance, said.
In February, 30.8% of respondents indicated that they believe their company will increase spending on business development activities during the next six months, an increase from 22.2% last month. Additionally, 69.2% believe there will be “no change” in business development spending, a decrease from 74.1% in January. None of the respondents said they believe there will be a decrease in spending, down from 3.7% last month.
“Wintrust Specialty Finance had a solid year of growth in spite of the global pandemic. 2021 has started out well, with strong application flow, approval rates and funding volume. Additionally, the portfolio has performed with low delinquency and credit quality,” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said. “I expect that mid-year will bring challenges as PPP funds fade. However, we are focused in industries that are performing with essential-use collateral that we believe will continue to perform.”
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