Equipment leasing and financing activity increases 21% year over year

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $628 billion equipment finance sector, showed overall new business volume for August was $6.9 billion, up 21 percent from volume of $5.7 billion in the same period in 2011. Volume was up 5 percent from the previous month. Year-to-date cumulative new business volume increased 16 percent.

Receivables over 30 days decreased for the third consecutive month to 1.9 percent, down from 2.2 percent in July and down 24 percent when compared to the same period in 2011. Charge-offs were unchanged from the previous month at 0.4 percent, and down by 33 percent compared to the same period last year.

Credit approvals decreased slightly to 77.0 percent in August from 77.5 percent in July. Sixty-two percent of participating organizations reported submitting more transactions for approval during August, down from 65.5 percent the previous month.

Finally, total headcount for equipment finance companies was unchanged from the previous month, and declined 3.0 percent year over year.

Separately, ELFA’s Monthly Confidence Index (MCI-EFI) for September is 53.0, up from the August index of 50.2, reflecting increased optimism despite concerns over companies’ willingness to expand their businesses in the face of economic and political uncertainty.

ELFA President and CEO William G. Sutton, CAE, said: “The pace of new equipment financing continued throughout the summer months as the housing sector, for one, showed signs of a rebound. However, businesses, both large and small, continue to build up cash reserves, indicating lingering apprehension over increasing energy prices, instability in the Arab world and a still fragile Eurozone economy.”

Thomas Depping, Chief Executive Officer, Ascentium Capital, said, “The general origination and credit quality trends detailed above mirror our experience at Ascentium Capital. The credit quality of our applications remains unprecedentedly strong and our delinquencies at historic lows. Although we have hedged ourselves against another possible global economic slowdown, we continue to expand our sales force as we have a generally optimistic view of our future. One thing I have learned over the past 30 years in the industry is that being over-capitalized and having substantial excess liquidity is never a bad thing.”

When asked about the outlook for the future, MCI survey respondent Anthony Cracchiolo, President and Chief Executive Officer, Vendor Services, U.S. Bank Equipment Finance, said, “The industry is performing well and new businesses are entering the segment to join the positive experience our asset class enjoys. However, the growth of our industry is tightly aligned with the overall U.S. economy and our industry’s future will be determined by the broader actions of the U.S. economy.”

More September 2012 survey results:

8.8% of executives responding said they believe business conditions will improve over the next four months, up from 6.3% in August. 73.5% of respondents believe business conditions will remain the same over the next four months, down from 78.1% in August. 17.6% believe business conditions will worsen, up from 15.6% the previous month.

11.8% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 6.3% in August. 76.5% believe demand will “remain the same” during the same four-month time period, up from 75% the previous month. 11.8% believe demand will decline, down from 18.8% in August.

14.7% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 15.6% in August. 85.3% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 84.4% the previous month. No survey respondents expect “less” access to capital, unchanged from August.

When asked, 29.4% of the executives reported they expect to hire more employees over the next four months, down from 31.3% in August. 67.6% expect no change in headcount over the next four months, up from 65.6% last month. 2.9% expect fewer employees, down from 3.1% of respondents who expected fewer employees in August.

76.5% of the leadership evaluates the current U.S. economy as “fair,” up from 68.8% last month. 23.5% rate it as “poor,” down from 31.3% in August.

5.9% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 6.3% in August. 79.4% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 78.1% in August. 14.7% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 15.6% who believed so last month.

In September, 29.4% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 15.6% in August. 70.6% believe there will be “no change” in business development spending, down from 81.3% last month, and no one believes there will be a decrease in spending, down from 3.1% last month.