Equipment Leasing and Financing Confidence Ticks Up in November

Equipment Leasing and Financing Confidence Ticks Up in November

The Equipment Leasing & Finance Foundation’s monthly confidence index for November 2020 shows an increase of 1.1 points, from 55.0 in October to 56.1 in November.

The index is a qualitative assessment both of prevailing business conditions and expectations for the future, as reported by key executives from the $900 billion equipment finance sector.

The Foundation has also released highlights of the COVID-19 Impact Survey of the Equipment Finance Industry, a monthly survey of industry leaders designed to track the impact of the coronavirus pandemic on the equipment finance industry.

Fifty-five responses were collected from Nov. 2-13 on a range of topics, including payment deferrals, defaults, and staff analysis.

They showed that 54% of companies expect the default rate will be greater in 2020 than in 2019. That’s down from 56% in October. Also, 35% expect it to be the same (unchanged from last month), and 11% expect it to be lower, compared to 9% last month.

Only 4% of lenders reported having more than 10% of their portfolio now under deferral, down from 7% of lenders last month. The largest percentage of respondents (69%) have 0.01-4.99% of dollars outstanding currently under payment deferral in their owned portfolio.

Comments from survey respondents follow MCI-EFI survey comments below, and additional survey results and analysis are available at https://www.leasefoundation.org/industry-resources/covid-impact-survey/.

[Note: Some MCI and COVID-19 Impact survey questionnaires and comments were submitted  before Election Day results were publicized.]

When asked about the outlook for the future, MCI-EFI survey respondent Michael Romanowski, president, Farm Credit Leasing, said, “All eyes are on the election. Depending on what shakes out with the political environment will impact businesses’ longer-term plans for investment. The present environment is on shaky ground and fiscal stimulus is needed to stop the tremors.”

November 2020 Survey Results
The overall MCI-EFI is 56.1, an increase from the October index of 55.0.  
 
•   When asked to assess their business conditions over the next four months, 26.9% of executives responding said they believe business conditions will improve over the next four months, down from 29.6% in October. 53.9% believe business conditions will remain the same over the next four months, an increase from 51.9% the previous month. 19.2% believe business conditions will worsen, an increase from 18.5% in October.

•   19.2% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 22.2% in October. 69.2% believe demand will “remain the same” during the same four-month time period, an increase from 66.7% the previous month. 11.5% believe demand will decline, relatively unchanged from 11.1% in October.

•   23.1% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3% in October. 76.9% of executives indicate they expect the “same” access to capital to fund business, an increase from 66.7% last month. None expect “less” access to capital, unchanged from the previous month.  

•   When asked, 30.8% of the executives report they expect to hire more employees over the next four months, up from 25.9% in October. 57.7% expect no change in headcount over the next four months, a decrease from 63% last month. 11.5% expect to hire fewer employees, relatively unchanged from 11.1% in October.

•   None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month. 76.9% of the leadership evaluate the current U.S. economy as “fair,” up from 55.6% in October. 23.1% evaluate it as “poor,” down from 44.4% last month.

•   34.6% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 25.9% in October. 50% indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 59.3% last month. 15.4% believe economic conditions in the U.S. will worsen over the next six months, up from 14.8% the previous month.

•   In November, 26.9 % of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 22.2% last month. 69.2% believe there will be “no change” in business development spending, a decrease from 70.4% in October. 3.9% believe there will be a decrease in spending, down from 7.4% last month.

November 2020 MCI-EFI Survey Comments from Industry Executive Leadership

Bank, Small Ticket
“Following the distraction of the election, business will get re-focused on winning with whatever the new rules of engagement are and will continue to find ways to win.”  David Normandin, CLFP, President and CEO, Wintrust Specialty Finance

 

Independent, Middle Ticket
“We believe better health outcomes related to the pandemic (therapeutics, forthcoming vaccine) coupled with more government stimulus will allow business formation and capital expenditures to return to a more normal pace.” Bruce J. Winter, President, FSG Capital, Inc.

 

Executive Comments from COVID-19 Impact Survey of the Equipment Finance Industry:

Bank, Small Ticket
“Over the near term we expect continued volatility due to the election and impact of the continued COVID pandemic until such time as a vaccine is developed and accepted. Mid- and long-term we expect continued growth due to the resilient nature of the U.S. economy and our industry.” Kirk Phillips, President & CEO, Wintrust Commercial Finance

 

Independent, Middle Ticket
“Our portfolio is comprised of all investment grade credits so we have not seen any defaults due to COVID-19 impact. We have not received any requests by our customers for deferral of rents.” Aylin Cankardes, President, Rockwell Financial Group

 

“The short-term effect will depend on the outcome of the election for my company as we are 100% oil and gas.” Tracy Trimble, President, US Global Asset Investments, LLC

 

To participate in the COVID-19 Impact Survey of the Equipment Finance Industry: The Foundation invites all regular ELFA member companies to participate each month. Survey responses are limited to one per company. If you did not receive a survey and would like to participate, please contact Stephanie Fisher, sfisher@leasefoundation.org, by November 30 to determine eligibility for inclusion in the December survey.

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