The Equipment Leasing & Finance Foundation (the Foundation) released the September 2020 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 $900 billion equipment finance sector. Overall, confidence in the equipment finance market is 56.5, an increase from the August index of 48.4.
The Foundation also released highlights of the COVID-19 Impact Survey of the Equipment Finance Industry, a monthly survey of industry leaders designed to track the impact of the coronavirus pandemic on the equipment finance industry. From 75 survey responses collected from September 1 to 13, results show that:
- 91% of equipment finance companies have offered payment deferrals, including extensions, modifications or restructuring
- 73% of companies expect that the default rate will be greater in 2020 than in 2019, down from 76% last month, while 20% expect it to be the same compared to 19% in August and 7% expect it to be lower compared to 5% last month
- 78% of companies have not furloughed or laid off employees since the start of the pandemic
Christopher Enbom, CLFP, CEO and Chairman, AP Equipment Financing, commented, “I am more positive than I was three months ago regarding the duration of the recession and the future in general. The economic stimulus was very well timed and now people are quickly adjusting to living with COVID. In certain industries spending has increased dramatically.”
“I have confidence that the equipment finance industry will always be a key element in providing capital to continue to support the supply chain,” noted Valerie Hayes Jester, president, Brandywine Capital Associates, Inc. “In an election year, with a pandemic and extensive social unrest, the immediate and medium-term future is not clear. The industry is durable and creative and will always be on the front lines of equipment acquisition and asset management.”
More comments from COVID-19 Impact Survey respondents and additional survey results and analysis are available here.
When asked about the outlook for the future, MCI-EFI survey respondent Dave Fate, president and CEO, Stonebriar Commercial Finance, said, “The equipment finance industry has always been resilient. The debt and equity markets are strong with lots of liquidity, and election noise will be over soon.”
Following are results from the September 2020 MCI-EFI survey:
- When asked to assess their business conditions over the next four months, 35.7% of executives responding said they believe business conditions will improve over the next four months, up from 24.1% in August; 46.4% believe business conditions will remain the same over the next four months, a decrease from 51.7% the previous month; and 17.9% believe business conditions will worsen, a decrease from 24.1% in August.
- 28.6% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 13.8% in August; 64.3% believe demand will “remain the same”, a decrease from 65.5% the previous month; and 7.1% believe demand will decline, a decrease from 20.7% in August.
- 17.9% of respondents expect more access to capital to fund equipment acquisitions over the next four months, up slightly from 17.2% in August; 78.6% indicate they expect the “same” access to capital to fund business, an increase from 75.9% last month; and 3.6% expect “less” access to capital, a decrease from 6.9% the previous month.
- When asked, 17.9% of the executives report they expect to hire more employees over the next four months, up from 13.8% in August; 71.4% expect no change in headcount over the next four months, an increase from 69% last month; and 10.7% expect to hire fewer employees, down from 17.2% the previous month.
- None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month; 46.4% of the leadership evaluate the current U.S. economy as “fair,” down from 48.3% in August; and 53.6% evaluate it as “poor,” up from 51.7% last month.
- 50% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 31% in August; 39.3% indicate they believe the U.S. economy will “stay the same”, a decrease from 44.8% last month; and 10.7% believe economic conditions in the U.S. will worsen, down from 24.1% the previous month.
- 28.6% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 31% last month; 71.4% believe there will be “no change” in business development spending, an increase from 48.3% in August; and none believe there will be a decrease in spending, down from 20.7% last month.