Equipment Leasing Industry Confidence Higher in November

According to the Equipment Leasing & Finance Foundation’s November 2017 Monthly Confidence Index, confidence in the equipment finance market is 67.0 in November, an increase from 63.7 in October.

When asked about the outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, said, “The House is considering its tax reform package which includes a reduction in the corporate tax rate to 20%. The assumption is that this will allow companies to invest more fully in their businesses. If this holds true, the tax package would be the catalyst to accelerate growth in our industry. Over the next several years the equipment finance industry could achieve record levels of new business production.”

When asked to assess their business conditions over the next four months, 32.4% of executives said they believe business conditions will improve over the next four months, a decrease from 40% in October. The rest of respondents (67.7%) believe business conditions will remain the same over the next four months, an increase from 60% in October.

A little more than one third (35.3%) of survey respondents believe demand for leases and loans to fund capital expenditures (CAPEX) will increase over the next four months, a decrease from 36.7% in October. Meanwhile, 64.7% believe demand will remain the same during the same four-month time period, up from 60% the previous month. None believe demand will decline, a decrease from 3.3% who believed so in October.

“We continue to see a steady flow of good quality transactions. Our average customer is still concerned with the lack of direction on tax issues and healthcare reform. Until there is clarity, we don’t expect to see a large volume of business expansion projects. There’s just too much unknown to fund transactions with leverage,” said Valerie Hayes Jester, president of Brandywine Capital Associates.

During the next fourth months, 29.4% of the respondents expect more access to capital to fund equipment acquisitions, up from 20% in October. The remaining respondents (67.7%) indicated they expect the same access to capital to fund business, down from 80% last month.

When asked, 35.5% of the executives report they expect to hire more employees over the next four months, an increase from 33.3% in October. There was a change to 61.8% in the number of executives who expect no change in headcount over the next four months, a decrease from 63.3% last month. But there was also a decrease from 2.9% who expect to hire fewer employees. The reading was at 3.3% in October.

The current U.S. economy was evaluated as excellent by 17.7% and fair by 82.4%. In October, all respondents evaluated it as fair.

“The positive economic tide is raising all ships. Low default levels, low interest rates and the continuing demand for equipment are all adding to the favorable environment,” said Harry Kaplun, president of Specialty Finance for Frost Bank.

Optimism about the economy’s future also brightened, with 32.5% of the survey respondents believing that U.S. economic conditions will get better over the next six months, an increase from 23.3% in October. Still, the majority (64.7%) of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 76.7% the previous month. The rest (2.9%) believe economic conditions in the U.S. will worsen over the next six months, an increase from none who believed so in October.

“I am concerned about the ongoing lack of results from Washington and the effects that this will have on the confidence of the business community over time,” said David Normandin, managing director of the Commercial Finance Group of Hanmi Bank.

In November, 52.9% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 36.7% in October. Meanwhile, 47.1% believe there will be no change in business development spending, a decrease from 63.3% the previous month.

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