Posted November 18, 2021

Equipment finance industry confidence higher in November

The Equipment Leasing & Finance Foundation releases the November 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market is 64.6, an increase from the October index of 61.1. 

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.

“While I believe the equipment leasing and finance industry will always perform well through various cycles, the last few months have shown a number of interesting data points. Strong corporate earnings continue to drive the equity markets. The current rise in Inflation rates is alarming and seems like it will be with us for a while. Continued issues with the lack of skilled and non-skilled labor are the number one concern of most of our customers. Supply chain issues are causing real disruption and seem to have no viable plan to alleviate them. The rest of Q4 and into Q1 will be very interesting as we navigate through year-end closing in our industry and the Christmas holiday season,” says Dave Fate, CEO, Stonebriar Commercial Finance.

November 2021 Survey Results:
The overall MCI-EFI is 64.6, an increase from the October index of 61.1.

  • When asked to assess their business conditions over the next four months, 34.6 percent of executives responding said they believe business conditions will improve over the next four months, up from 25.9 percent in October. 46.2 percent believe business conditions will remain the same over the next four months, down from 70.4 percent the previous month. 19.2 percent believe business conditions will worsen, up from 3.7 percent in October.
  • Almost half -- 42.3 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 22.2 percent in October. 50 percent believe demand will remain the same during the same four-month period, a decrease from 74.1 percent the previous month; 7.7 percent believe demand will decline, up from 3.7 in October.
  • Just over a quarter of respondents -- 26.9 percent expect more access to capital to fund equipment acquisitions over the next four months, up from 14.8 percent in October; 73.1 percent of executives indicate they expect the “same” access to capital to fund business, a decrease from 85.2 percent last month. None expect “less” access to capital, unchanged from the previous month.  
  • When asked, 53.9 percent of the executives report they expect to hire more employees over the next four months, up from 40.7 percent in October; 46.2 percent expect no change in headcount over the next four months, a decrease from 59.3 percent last month. None expect to hire fewer employees, unchanged from October.
  • A minority -- 15.4 percent -- of the leadership evaluate the current U.S. economy as excellent, an increase from 7.4 percent the previous month. 80.8 percent of the leadership evaluate the current U.S. economy as fair, down from 81.5 percent in October. 3.9 percent evaluate it as poor, down from 11.1 percent last month.
  • Nearly a quarter -- 23.1 percent -- of the survey respondents believe that U.S. economic conditions will get better over the next six months, an increase from 22.2 percent in October. More than half -- 57.7 percent -- indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 63 percent from last month. Just 19.2 percent believe economic conditions in the U.S. will worsen over the next six months, up from 14.8 percent the previous month.
  • In November, 42.3 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, down slightly from 42.9 percent the previous month; 57.7 percent believe there will be no change in business development spending, up slightly from 57.1 percent in October. None believe there will be a decrease in spending, unchanged from last month.

November 2021 MCI-EFI survey comments from industry executive leadership:

Bank, Middle Ticket
“We continue to see interest in capital expansion for the sectors we serve, especially with middle market customers. Supply chain issues continue to be a headwind to the implementation of capital investment.” -- Michael Romanowski, president, Farm Credit Leasing

Independent, Middle Ticket
“Business owners are feeling much more confident and are moving forward with capital acquisitions, some that had been delayed because of the pandemic. Pending no flare up of COVID-19 infections in the coming months, we expect smooth sailing for the next several quarters.” -- Bruce J. Winter, president, FSG Capital, Inc.

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

Survey results are posted on the Foundation website.