ELFA survey on equipment leasing: February new business volume declines

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $900 billion equipment finance sector, showed their overall new business volume for February was $7.1 billion, down 4 percent year-over-year from new business volume in February 2021. Volume was down 14 percent month-to-month from $8.3 billion in January. Year-to-date, cumulative new business volume was down nearly 1 percent compared to 2021.

Receivables over 30 days were 1.7 percent, down from 1.8 percent the previous month and down from 2.1 percent in the same period in 2021. Charge-offs were 0.09 percent, down from 0.17 percent the previous month and down from 0.55 percent in the year-earlier period.

Credit approvals totaled 78.2 percent, down from 78.4 percent in January. Total headcount for equipment finance companies was down 12.2 percent year-over-year, a decrease due to significant downsizing at an MLFI reporting company.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in March is 58.2, a decrease from 61.8 in February.

ELFA President and CEO Ralph Petta said, “New business volume at MLFI 25 companies has grown modestly in 2022, as it typically does in the early months. What is eye-catching, however, is the extremely high credit quality reported by respondents. Geopolitical unrest, increasing interest rates, inflation and continuing supply disruptions all pose headwinds that bear monitoring. But, equipment finance companies always find ways to stay relevant, resilient and reliable in helping American businesses acquire the assets they need to thrive.”

Kris Foster, President of Equipment Finance, Pinnacle Financial Partners, Inc., said, “With a quarter of the year nearly complete, we remain cautiously optimistic with steady deal flow and a strong pipeline. Supply chain constraints continue to be a major issue as we see equipment delivery delays for the foreseeable future. Positively, we see these delivery delays coupled with strong demand across most asset classes being a tailwind for future financing opportunities. Competition continues to be very strong with continued pressure on loan yield spreads. Credit quality and credit metrics are at historically strong levels; however, we are closely monitoring current geopolitical events, future Fed rate hikes, growing inflationary pressures on the broader economy, yield curve inversion and record high costs for many asset classes.”

The MLFI-25 is the only near-real-time index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report.