Industry Confidence in Equipment Lease, Finance Eased

In late April, the Equipment Leasing & Finance Foundation (the Foundation) shared that confidence in the equipment finance market was 70.7, down from the four-year high of 72.1 in March. Let’s take a look at what that actually means. The data comes from the April 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), which is a survey designed to collect leadership data from a wide cross section of industry executives. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Because the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence. The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as key executives in the $903 billion equipment finance sector see it. These are financiers.

As an almost contradiction to the numbers, MCI-EFI survey respondent Valerie Hayes Jester, who is the president of Brandywine Capital Associates, Inc., said, “We have seen an increase in requests for equipment financing this month. We attribute this demand to increased confidence in the economy and potential concern that interest rates may begin to rise in the fourth quarter. Our economy has shown tremendous resilience in these last years and that has influenced the mindset of those that need to purchase equipment for businesses. Capital and credit windows are at historic points; business owners know that this time is a good one to invest.”

Here are some results of the April 2015 survey, reported by the Foundation.

• When asked to assess their business conditions over the next four months, 44.4% of executives responding said they believe business conditions will improve over the next four months, down from 50% in March. 55.6% of respondents believe business conditions will remain the same over the next four months, up from 50% in March. None believe business conditions will worsen.
• 48.2% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 41.7% in March. 51.9% believe demand will “remain the same” during the same four-month time period, down from 58.3% the previous month. None believe demand will decline.
• 25.9% of executives expect more access to capital to fund equipment acquisitions over the next four months, up slightly from 25% in March.
• 74.1% of survey respondents indicate they expect the “same” access to capital to fund business, down slightly from 75% in March. None expect “less” access to capital.
• In April, 59.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 58.3% in March. 40.7% believe there will be “no change” in business development spending, a decrease from 41.7% last month. None believe there will be a decrease in spending.

Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising. Respondent William Verhelle, CEO of First American Equipment Finance, stated, “We remain optimistic that low energy prices and gradually improving economic conditions will continue to drive increased capital equipment acquisitions.”