Equipment Finance Industry Confidence Declines

“The key to future business confidence rests with leadership in Washington, DC, and their ability to craft a budget that Wall Street, Main Street, and the global community view positively,” said Russell Nelson, president of Farm Credit Leasing Services Corporation, in response to a survey by The Equipment Leasing & Finance Foundation. The responses to this survey make up the August 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $521 billion equipment finance sector.

Overall, confidence in the equipment finance market is 50.0, down from the July index of 56.2, indicating apparent industry reaction to U.S. economic conditions and federal government fiscal management and policies.

When asked to assess their business conditions over the next four months, 13.2% of all executives responding said they believe business conditions will improve over the next four months, slightly decreased from 14.0% in July. However 21.1% of executives believe business conditions will worsen, a sharp increase from 4.7% in July, and 65.8% of respondents believe business conditions will remain the same, a decrease from 81.4% in July.

21.1% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 14% in July. 57.9% believe demand will “remain the same” during the same four-month time period, a decrease from 74.4% the previous month. 21.1% believe demand will decline, up from 11.6% who believed so in July.

21.1% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 23% in July. 73.7% of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 76.7% the previous month. 5.3% of survey respondents expect “less” access to capital, the first time in nine months any respondents said they expect “less” access to capital.

When asked, 23.7% of the executives reported they expect to hire more employees over the next four months, down from 32.6% in July. 65.8% expect no change in headcount over the next four months, an increase from 58% last month, while 10.5% expect fewer employees, an increase from 9.6% in July.

55.3% of the leadership evaluate the current U.S. economy as “fair,” down from 72% who did in July. 44.7% rate it as “poor,” up from 27.9% last month.

5.3% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 9.3% in July. 63.2% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 79% in July. 31.6% responded that they believe economic conditions in the U.S. will worsen over the next six months, up from 11.6% who believed so last month.

In August, 28.9% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 44.2% in July. 68.4% believe there will be “no change” in business development spending, up from 55.8% last month, and 2.6% believe there will be a decrease in spending, up from no one who believed so last month.

“Until such time that the federal government can remove the unpredictability related to taxes and fiscal policy the economy will continue to sputter as the business community will be very cautious with respect to additional investment. This scenario will not bode well for the equipment finance industry,” concluded a bank executive responding to the survey.

However, Aylin Cankardes, president of Rockwell Financial Group, had a more positive outlook. “Growth is slower than expected but we are seeing some positive signs of larger capital expenditures,” he said.

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