Equipment Lease Finance Industry Confidence Levels Off in March

Confidence in the equipment finance market decreased slightly  from February, according to The Equipment Leasing & Finance Foundation’s March 2013 Monthly Confidence Index. The March Index is 58.0, compared to February’s 58.7. Analysts say this reflects a leveling off in industry participants’ optimism after two consecutive increases.

The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $725 billion equipment finance sector.

“In the short term we see continued demand for equipment at a lessened pace than we did in the fourth quarter of 2012,” said survey respondent Valerie Hayes Jester, president, Brandywine Capital Associates, Inc. “Until the issues in Washington regarding the budget are resolved, we don't expect the economy to move forward at a pace that sustains strong demand for equipment acquisition.”

March 2013 Survey Results:

When asked to assess their business conditions over the next four months, 21.9% of executives responding said they believe business conditions will improve over the next four months, up from 20% in February.  71.9% of respondents believe business conditions will remain the same over the next four months, down from 77.1% in February. 6.3% believe business conditions will worsen, up from 2.9% the previous month.

21.9% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 20% in February.  68.8% believe demand will “remain the same” during the same four-month time period, down from 77.1% the previous month.  9.4% believe demand will decline, up from 2.9% in February.

28.1% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 22.9% in February. 68.8% of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 77.1% the previous month. 3.1% expect “less” access to capital, up from zero percent of respondents in February.

When asked, 25% of the executives reported they expect to hire more employees over the next four months, up from 22.9% in February.  71.9% expect no change in headcount over the next four months, up from 65.7% last month.  3.1% expect fewer employees, down from 11.4% of respondents who expected fewer employees in February.

84.4% of the leadership evaluates the current U.S. economy as “fair,” down from 85.7% last month.  12.5% rate it as “poor,” up from 11.4% in February. One survey respondent rated the current economy as “excellent.”

15.6% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 22.9% in February.  71.9% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 74.3% in February.  12.5% believe economic conditions in the U.S. will worsen over the next six months, an increase from 2.9% who believed so last month.

In March, 31.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 37.1% in February.  68.8% believe there will be “no change” in business development spending, up from 60% last month.  No one believes there will be a decrease in spending, down from 2.9% who believed so last month.

Comments from Industry Executive Leadership:

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

Independent, Small Ticket

“Economic and political headwinds continue to swirl. Small business confidence is still very cautious and wary. Are we nearing the Groundhog Day of investment rather than austerity?”  Paul Menzel, President & CEO, Financial Pacific Leasing, LLC

Independent, Middle Ticket

“We are seeing more options opening up for funding transactions as the market is adjusting to demand for more B and BB rated opportunities.  There is still pricing pressure on the investment grade space which continues to keep the margins thin.”  Aylin Cankardes, President, Rockwell Financial Group

Bank, Small Ticket

“The equipment finance industry is making it easier for customers to replace their equipment.  Subsequently, business is turning to us more and more.  We feel good about the future of the equipment finance industry.”  Kenneth Collins, CEO, Susquehanna Commercial Finance, Inc.

Bank, Middle Ticket

“Continuation of the low interest rate environment, modest improvement in the housing sector, and the need for replacement/addition of new equipment and facilities to be positioned for growth opportunities as the economy gains momentum will generate increased growth in the equipment finance industry for 2013.”   Russell Nelson, President, Farm Credit Leasing Services Corporation