Trends

 

02 03 2014

02 03 2014

Strong Equipment Leasing Rates Reflect Improving Economy

Mixed results came out of the Equipment Leasing and Finance Association’s Monthly Leasing and Financing Index, which was released on Jan. 27. The survey gathers information from 25 companies that are chosen to represent a cross section of the $827 billion equipment finance sector.

According to the data, the overall new business volume in December was $10.7 billion, which represented a 7 percent drop from December 2012. However, the month-over-month numbers showed a 62 percent spike from November’s volume of $6.6 billion. The new business volume for all of 2013 was a 3 percent increase from that of 2012.

Receivables over 30 days saw a small bump between November and December, reaching 1.9 percent from 1.8 percent. This also represented a 0.3 percent bump from December 2012.

Credit approvals reached 78.3 percent, a 1.8 percent increase from November, while 57 percent of the surveyed businesses indicated that they had submitted more transactions for approval during December, a 10 point increase from the month prior.

The total number of equipment financing companies saw a 2 percent year-over-year increase.

Numbers leave many optimistic

“December’s strong volume number is consistent with the typical growth pattern of a very busy end of year for many equipment finance organizations,” said William Sutton, ELFA president and CEO. “Overall, 2013 was a very good year for many ELFA members – the cumulative growth data for the year bear this out.”

Sutton also pointed out that there were numerous reports of margin compression across most sectors, which served to offset the strong numbers for new business activity. Profitability was undercut by low interest rates, declining yields and aggressive competition. However, he added, the increase in delinquencies is eased by the manageable credit quality.

Sutton has good cause for optimism. According to the report, January’s Equipment Leasing & Finance Foundation’s Monthly Confidence Index reached 64.9. This represents the highest confidence level in two years, and an increase of nearly 10 points from December’s index of 55.8. The fact that industry leaders are feeling confident about the general economic outlook seems to be the cause for the uptick.

“I remain relatively optimistic about 2014, and believe that we are heading in the right direction,” LEAF Commercial Capital President and COO Miles Herman said. “My optimism is tempered by the nominal shortfall indicated by the MLFI-25 between December of 2012 and December of 2013. Nevertheless, the report also shows that business volume is up overall, and that December was in fact 62 percent above November. Based on the most recent Monthly Confidence Index, it appears that my colleagues concur, at least to varying degrees. It is of course worth noting that this MCI is the strongest it has been for the prior 24 months. That kind of consistent optimism is, in and of itself, a good sign.”

Small-business owners who are looking to capitalize on the growing market and explore equipment leasing options should turn to National funding for their lending needs.

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