Equipment Finance Industry Confidence Improves In August

Published online: Aug 20, 2022 Articles
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Washington, DC – The Equipment Leasing & Finance Foundation (the Foundation) has released the August 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $900 billion equipment finance sector. Overall, confidence in the equipment finance market is 50, an increase from the July index of 46.1.

When asked about the outlook for the future, MCI-EFI survey respondent Dave Fate, Chief Executive Officer, Stonebriar Commercial Finance, said, "The resilience of the equipment leasing and finance industry continues to demonstrate itself during 2022. Over the decades the industry has overcome and prospered through recessions, a financial crisis, and a global health pandemic. We are all now faced with the challenges of supply chain disruption, inflation, labor shortages, and the ‘noise’ that accompanies the upcoming midterm elections in a few months. Regardless of these challenges, the industry always performs well. Speaking on behalf of Stonebriar Commercial Finance, I am happy to report that SCF is on a record pace for new business volume and profitability this year, and our portfolio continues to perform exceptionally well.”   

August 2022 Survey Results:

The overall MCI-EFI is 50, an increase from the July index of 46.1.

  • When asked to assess their business conditions over the next four months, 14.8 percent of executives responding said they believe business conditions will improve over the next four months, an increase from 3.7 percent in July. 51.9 percent believe business conditions will remain the same over the next four months, down from 63 percent the previous month. 33.3 percent believe business conditions will worsen, unchanged from July.
  • 7.7 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 11.1 percent in July. 76.9 percent believe demand will “remain the same” during the same four-month time period, an increase from 55.6 percent the previous month. 15.4 percent believe demand will decline, down from 33.3 percent in July.
  • 7.4 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 11.1 percent in July. 85.2 percent of executives indicate they expect the “same” access to capital to fund business, an increase from 81.5 percent last month. 7.4 percent expect “less” access to capital, unchanged from the previous month.
  • When asked, 25.9 percent of the executives report they expect to hire more employees over the next four months, up from 18.5 percent in July. 74.1 percent expect no change in headcount over the next four months, a decrease from 77.8 percent last month. None expect to hire fewer employees, down from 3.7 percent in July.
  • None of the leadership evaluate the current U.S. economy as “excellent,” a decrease from 11.1 percent the previous month. 85.2 percent of the leadership evaluate the current U.S. economy as “fair,” up from 77.8 percent in July. 14.8 percent evaluate it as “poor,” an increase from 11.1 percent last month.
  • 11.1 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 7.4 percent in July. 51.9 percent indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 40.7 percent last month. 37 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 51.9 percent the previous month.
  • In August 29.6 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 22.2 percent the previous month. 70.4 percent believe there will be “no change” in business development spending, down from 74.1 percent in July. None believe there will be a decrease in spending, down from 3.7 percent last month.

August 2021 MCI-EFI Survey Comments From Industry Executive Leadership:

Bank, Small Ticket
“The commercial equipment finance business remains strong and nimble. As we see elevated rates of inflation continue and the Fed continuing to raise rates, we will adapt and find solutions to meet our customers’ needs. Through this period, I am thoughtful about portfolio performance and potential challenges that many of our customers will face. Staying focused on supporting our customers through changes is valuable for us to continue to grow.” David Normandin, CLFP, President and CEO, Wintrust Specialty Finance

Bank, Middle Ticket

“We have a number of large projects that will be closing by the end of the year resulting in solid year-over-year growth. Many of these projects have been delayed due to supply chain issues from last year. The future is a bit cloudy with talks of recession and inflation still running hot. That said, customers are still looking to lock in historically low rates to finance major capital investments.” Michael Romanowski, President, Farm Credit Leasing

“Growth opportunities remain significant for companies that understand their clients. As clients deal with uncertainty, equipment leasing and finance companies that are both sophisticated and creative will add value and thrive.” Alan Sikora, CEO, First American Equipment Finance, an RBC/City National Company

About The MCI

Why an MCI-EFI?

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.

Who Participates In The MCI-EFI?

The respondents are comprised of a wide cross-section of industry executives, including large-ticket, middle-market and small-ticket banks, independents, and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry's confidence.

How Is The MCI-EFI Designed?

The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

  1. Current business conditions
  2. Expected product demand over the next four months
  3. Access to capital over the next four months
  4. Future employment conditions
  5. Evaluation of the current U.S. economy
  6. U.S. economic conditions over the next six months
  7. Business development spending expectations
  8. Open-ended question for comment

How May I Access The MCI-EFI?

Survey results are posted on the Foundation website, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/, included in the Foundation Forecast eNewsletter, and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

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