Equipment Finance Confidence Declines as Inflation Takes Its Toll

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The May results are in, and equipment finance companies appear to be losing confidence in the year ahead.

The Equipment Leasing & Finance Foundation's May 2022 Monthly Confidence Index is now at 49.6, a 6.5-point decrease from the April index of 56.1, and a staggering 22.5-point drop compared to the same period last year.

When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, president and CEO of Wintrust Specialty Finance, said, “Adapting to change is what the equipment leasing industry is all about. Our current rising-rate environment will be good for the overall financial health of equipment finance companies as obligors adapt to the new world rate order and margin is built back into the business. I do think this will create challenges for many who may not have a long-term stable capital structure.”

24-Month Monthly Confidence Index - Equipment Finance IndustryConfidence in the equipment finance market is 49.6 for May 2022, a decrease from the April index of 56.1.Equipment Leasing and Finance AssociationIn addition, respondents say they expect the following to occur over the next four months:

  • 6.9% of executives responding said they believe business conditions will improve, down 14.8% from April. 
  • 10.3% of the survey respondents believe demand for leases and loans to fund capital expenditures will increase, down from 29.6% in the previous month.
  • 13.8% of the respondents expect more access to capital to fund equipment acquisitions, down from 22.2% in April. 
  • 48.3% of the executives report they expect to hire more employees, up from 40.7% in the previous month. 
  • 3.5% of the leadership evaluate the current U.S. economy as “excellent,” down 14.8% from April.

Finally, 69% of respondents believe economic conditions in the U.S. will worsen over the next six months, an increase from 40.7% in the previous month.

Divided by market segments, respondents were as follows: banks, 58.6%; captive finance, 13.8%; and independent finance companies, 27.6%

The index is a qualitative assessment of key equipment finance sector executives on both prevailing business conditions and future expectations, according to the foundation.