Equipment Finance Industry Confidence Decreases in May

According to the Equipment Leasing & Finance Foundation’s May 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 49.6, a decrease from the April index of 56.1.

“Adapting to change is what the equipment leasing industry is all about,” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said. “Our current rising rate environment will be good for the overall financial health of equipment finance companies as obligors adapt to the new world rate order and margin is built back into the business. I do think this will create challenges for many who may not have a long-term, stable capital structure.”

When asked to assess their business conditions over the next four months, 6.9% of executives said they believe business conditions will improve over the next four months, a decrease from 14.8% in April, while 62.1% believe business conditions will remain the same over the next four months, down from 63% the previous month. Nearly a third (31%) believe business conditions will worsen, an increase from 22.2% in April.

Only 10.3% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 29.6% in April, while 65.5% believe demand will “remain the same” during the same four-month time period, an increase from 55.6% the previous month. Nearly a quarter (24.1%) believe demand will decline, up from 14.8% in April.

According to the index, 13.8% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 22.2% in April, while 86.2% of executives expect the “same” access to capital to fund business, an increase from 77.8% last month. None expect “less” access to capital, unchanged from last month.

When asked, 48.3% of the executives said they expect to hire more employees over the next four months, up from 40.7% in April, while 44.8% expect no change in headcount over the next four months, a decrease from 59.3% last month. In addition, 6.9% expect to hire fewer employees, up from none in April.

Only 3.5% of the leadership evaluated the current U.S. economy as “excellent,” a decrease from 14.8% last month, while 79.3% of the leadership evaluated the current U.S. economy as “fair,” up from 74.1% in April. In addition, 17.2% evaluated the U.S. economy as “poor,” an increase from 11.1% last month.

According to the index, 3.5% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 7.4% in April, while 27.6% believe the U.S. economy will “stay the same” over the next six months, a decrease from 51.9% last month. Most respondents (69%) believe economic conditions in the United States will worsen over the next six months, an increase from 40.7% last month.

This month, 34.5% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 29.6% last month, while 65.5% believe there will be “no change” in business development spending, down from 66.7% in April. None believe there will be a decrease in spending, down from 3.7% last month.

“Supply chain issues continue to have an impact on lease commencements, with dates getting pushed with delivery delays. We are seeing an increase in renewals and over-term rentals,” Michael Romanowski, president of Farm Credit Leasing, said.