Equipment Leasing and Finance Industry Confidence Eases in July

According to the Equipment Leasing & Finance Foundation’s July 2018 Monthly Confidence Index for the Equipment Finance Industry, overall confidence in the equipment finance market is 62.8 in July, easing from the June index of 66.2.

When asked about the outlook for the future, survey respondent Michael Romanowski, president of Farm Credit Leasing Services, said, “Customers continue to digest the changes related to tax reform to determine how best to finance capital investment. Some customers are delaying capital investment until they better understand the impacts related to tariffs.”

When asked to assess their business conditions over the next four months, 19.4% of executives said they believe business conditions will improve over the next four months, a decrease from 33.3% in June. The vast majority (77.4%) of respondents believe business conditions will remain the same over the next four months, an increase from 63.6% the previous month. There was a marginal increase of executives who believes business conditions will get worse (3.2%) compared to last month (3.0%).

“Businesses continue to invest in equipment and financing those purchases. The manic nature of the stock markets and our government leadership seems to be having minimal impact on the decisions of our small business customers,” said Valerie Hayes Jester, president of Brandywine Capital Associates. “It will be an interesting second half of the year as we observe expansion trends among our customers.”

Demand for leases and loans to fund capital expenditures is expected to remain the same by most executives (77.4%), which is a slight increase from the 75.8% that felt that way in June. Meanwhile, 19.4% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 24.2% in June. The remaining respondents (3.2%) believe demand will decline, up from the none who believed so in June.

“Demand for new and used equipment remains strong so applications are up, and we are seeing some better quality so approvals are up, too. All of this is growing our originations,” said David T. Schaefer, CEO of Mintaka Financial.

Nearly 84% of executives said they expect the same access to capital to fund equipment acquisitions over the next four months, while the remaining respondents (16.1%) are expecting more access to capital for such endeavors.

When asked, 45.2% of the executives reported they expect to hire more employees over the next four months, a decrease from 57.6% in June. A slight majority (51.6%) expect no change in headcount over the next four months, an increase from 42.4% last month, while 3.2% expect to hire fewer employees, an increase from none in June.

Optimism about the current U.S. economy remained relatively strong, with 41.9% of executives rating it as excellent and 60.6% evaluating it as fair. Most expect conditions to stay the same (77.4%), but there was a rise of more than 3% in those that believe they will get worse in the next six months.

“Times are good in the U.S. There are no pending problems that can have a significant economic effect,” said Harry Kaplun, president of Specialty Finance at Frost Bank.

In July, 45.2% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 42.4% in June. Meanwhile, 54.8% believe there will be no change in business development spending, a decrease from 57.6% the previous month. None believe there will be a decrease in spending, which is unchanged from last month.

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