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Equipment Financers Expect 2014 to End Well

Sept. 25, 2014
If expectations are accurate, 2014 could be the strongest year for equipment financing since the beginning of the recession.

September confidence of key executives from the $827 billion equipment finance sector as gauged by the Monthly Confidence Index for the Equipment Finance Industry is 60.2, an increase from the August index of 58.9. 

Overall new business volume for August was $7.2 billion, up 13 percent from new business volume in August 2013. Month over month, new business volume was down 9 percent from July. Year to date, cumulative new business volume increased 6 percent compared to 2013.  

“We are experiencing stronger demand than in the past several months, which bodes well for a strong fourth quarter,” said Valerie Hayes Jester, president, Brandywine Capital Associates, Inc. “There is still concern for yield erosion, but we look forward to concluding the year on a positive trend.”

“The YTD-2014 metric measured by the MLFI-25 demonstrates a solid year in the equipment finance industry,” said Larry R. Stevens, president and CEO, Med One Capital. “If the month-to-month trends continue for the remainder of 2014, our industry will experience the strongest new business performance since well before the beginning of the recession.”

Survey Results:

  • When asked to assess their business conditions over the next four months, 36.4% of executives responding said they believe business conditions will improve over the next four months, up from 18.2% in August.  60.6% of respondents believe business conditions will remain the same over the next four months, down from 78.8% in August.  3% believe business conditions will worsen, unchanged from the previous month.
  • 30.3% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 21.2% in August.  66.7% believe demand will “remain the same” during the same four-month time period, down from 75.8% the previous month.  3% believe demand will decline, unchanged from August.
  • 15.2% of executives expect more access to capital to fund equipment acquisitions over the next four months, unchanged from August.  84.8% of survey respondents indicate they expect the “same” access to capital to fund business, and none expects “less” access to capital, both also unchanged from the previous month.
  • When asked, 30.3% of the executives reported they expect to hire more employees over the next four months, a decrease from 33.3% in August.  60.6% expect no change in headcount over the next four months, up from 57.6% last month.  9.1% expect fewer employees, unchanged from August.
  • 6.1% of the leadership evaluates the current U.S. economy as “excellent,” unchanged from last month.  87.9% of the leadership evaluates the current U.S. economy as “fair,” and 6.1% rate it as “poor,” both also unchanged from August.
  • 27.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 30.3% who believed so in August.  66.7% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, unchanged from August.  6.1% believe economic conditions in the U.S. will worsen over the next six months, up from 3% who believed so last month.
  • In September, 15.2% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 21.2% in August.  84.8% believe there will be “no change” in business development spending, an increase from 78.8% last month.  None believe there will be a decrease in spending, unchanged from last month.

Comments from Executives:

Captive, Small Ticket

“Equipment replacement and cloud financing should drive demand.  The regulatory environment will increase burdens on lending/leasing activities.” --Anthony Pacchiano, Vice President and General Manager, ADP Commercial Leasing

Bank, Small Ticket

“While the consumer and commercial sectors are still suffering a hangover from the great recession, even after five years, the aversion to debt will slowly succumb to the need to upgrade and replace equipment.” --Paul Menzel, President and Chief Executive Officer, Financial Pacific Leasing

Bank, Middle Ticket

“As we approach the fourth quarter I am hopeful an improving economy collides with our typical seasonal upswing in new business activity. If this occurs our industry will finish the year with very strong results and a positive outlook for 2015.”  --Thomas Jaschik, President, BB&T Equipment Finance

Bank, Middle Ticket

“Businesses are beginning to invest in new equipment to increase capacity, not just to replace aging equipment.  For the past two years the majority of purchases were replacement, not expansion. The recovery continues to be slow.” --Elaine Temple, President, BancorpSouth Equipment Finance

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