Equipment leasing and finance confidence level decreases in May
Overall, confidence in the equipment finance market is 50.7, a decrease from the April index of 52.9.
The Equipment Leasing & Finance Foundation (the Foundation) releases the May 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) for May 2024. The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector.
When asked about the outlook for the future, MCI-EFI survey respondent Bruce J. Winter, President, FSG Capital, Inc., said, “This year, the story of our industry centers on the availability of funding, creating a world of ‘haves’ versus ‘have nots.’ Undoubtedly some active funders today will become ‘have nots’ as their traditional funding mechanisms change. This will create substantial opportunities for strong and experienced participants to pick up not only market share, but more importantly, key personnel that have become displaced from their historical employers. Making the right move(s) now in this time of market disruption will allow these entities to grow and diversify their businesses while others are unable.”
When asked to assess their business conditions over the next four months, 11.1 percent of the executives responding said they believe business conditions will improve over the next four months, a slight increase from 10.7 percent in April. However, 77.8 percent believe business conditions will remain the same over the next four months, down from 85.7 percent the previous month; 11.1 percent believe business conditions will worsen, an increase from 3.6 percent in April.
Just 11.1 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 7.1 percent in April and 81.5 percent believe demand will remain the same during the same four-month time period, down from 92.9 percent the previous month. Only 7.4 percent believe demand will decline, an increase from none in April.
Of the respondents, 14.8 percent expect more access to capital to fund equipment acquisitions over the next four months, up slightly from 14.3 percent in April and 77.8 percent of executives indicate they expect the same access to capital to fund business, up from 71.4 percent last month. Only 7.4 percent expect less access to capital, down from 14.3 percent the previous month.
When asked, 22.2 percent of the executives report they expect to hire more employees over the next four months, an increase from 17.9 percent in April and 74.1 percent expect no change in headcount over the next four months, up from 71.4 percent last month. A scant 3.7 percent expect to hire fewer employees, down from 10.7 percent in April.
None of the leadership evaluate the current U.S. economy as excellent, unchanged from the previous month, while 85.2 percent of the leadership evaluate the current U.S. economy as fair, down from 92.9 percent in April. Finally, 14.8 percent evaluate it as poor, up from 7.1 percent last month.
Only 7.4 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, down from 17.9 percent in April, while 63 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 71.4 percent last month. Almost a third (29.6 percent) believe economic conditions in the U.S. will worsen over the next six months, an increase from 10.7 percent the previous month.
In May, 11.1 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 17.9 percent the previous month while 81.5 percent believe there will be no change in business development spending, up from 78.6 percent in April. 7.4 percent believe there will be a decrease in spending, up from 3.6 percent last month.
May 2024 survey comments from industry executive leadership
Bank, Small Ticket
“Businesses will always need equipment. There may be a few less buyers, but in times like these there is less competition as lenders pull back so it evens out. Having a strong sales team to find those buyers and the right program structure to attract those buyers is key,” says Donna Yanuzzi, EVP, 1st Equipment Finance, Inc. (FNCB Bank)
Bank, Middle Ticket
“The delay of expected or hoped-for interest rate reductions seems to be leading some entities to reconsider capital projects. To date, volume and credit quality have held up, but it’s not clear what the future will hold,” says Jason Lueders, president, Farm Credit Leasing.
Complete survey results can be found at https://www.leasefoundation.org/industry-resources/monthly-confidence-index/.
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