Equipment Finance Industry Confidence Declines

According to the Equipment Leasing & Finance Foundation (the Foundation), confidence in the equipment finance market is 47.6, down from the August index of 50.0. This indicates continuing concern with global economic conditions and their impact on the industry.

This is among the key findings of the September 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, 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.

When asked about the outlook for the future, survey respondent David T. Schaefer, President, Orion First Financial, LLC, said, “Near term prospects for organic origination growth will be less than desired. To significantly increase volume, companies will need to focus on increased market share and/or develop new products and channels. We need to make our own opportunities and not wait for the economy to get back to ‘normal.’”

September 2011 Survey Results:
The overall MCI-EFI is 47.6, a decrease from the August index of 50.0.
· When asked to assess their business conditions over the next four months, 4.9% of executives responding said they believe business conditions will improve over the next four months, down from 13.2% in August. 61.0% of respondents believe business conditions will remain the same over the next four months, a decrease from 65.8% in August. 34.1% of executives believe business conditions will worsten, an increase from 21.1% in August.

12.2% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 21.1% in August. 68.3% believe demand will “remain the same” during the same four-month time period, an increase from 57.9% the previous month. 19.5% believe demand will decline, down from 21.1% who believed so in August.

15.0% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 21.1% in August. 82.5% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 73.7% the previous month. 2.5% of survey respondents expect “less” access to capital, a decrease from 5.3% who expected less access to capital in August.

When asked, 17.5% of the executives reported they expect to hire more employees over the next four months, down from 23.7% in August. 72.5% expect no change in headcount over the next four months, an increase from 65.8% last month, while 10.0% expect fewer employees, a slight decrease from 10.5% in August.

55.0% of the leadership evaluates the current U.S. economy as “fair,” unchanged from last month. 45.0% rate it as “poor,” also relatively unchanged from August.

2.5% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 5.3% in August. 75.0% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 63.2% in August. 22.5% responded that they believe economic conditions in the U.S. will worsen over the next six months, down from 31.6% who believed so last month.

In September, 30.0% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 28.9% in August. 70.0% believe there will be “no change” in business development spending, up from 68.4% last month, and no one believes there will be a decrease in spending, down from 2.6% who believed so last month.

September 2011 MCI Survey 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.

Bank, Large Ticket
“This industry is not the issue; the uncertainty and inconsistency in the global economy are the concerns.” Executive, Large Ticket, Bank

Independent, Middle Ticket
“We are starting to see more demand for equipment leases across various sectors. The transaction sizes are increasing with a strong push to get capital equipment in by year end. Rates are becoming very competitive for the high-end customers, but still a void exists for getting middle market credits funded.” Aylin Cankardes, President, Rockwell Financial Group

Bank, Small Ticket
“Optimistic for the long term and very cautious in the short term. The conditions in Europe will continue to deteriorate causing a ‘short term’ negative effect in the U.S. markets, which includes the leasing and finance industry.” Kenneth Collins, Chairman and CEO, Susquehanna Commercial Finance, Inc.

Independent, Small Ticket
“The industry overall is faring well through these challenging times. In the small ticket sector we still see a lack of momentum and sluggish demand. The summer's stock market fluctuations, debt ceiling issues, and the recent hurricane will most likely keep demand on the low side for the foreseeable future. Confidence among many small business owners continues to erode.” Valerie Hayes Jester, President, Brandywine Capital Associates, Inc.

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