The equipment finance industry saw new business volume decrease 7 percent in 2020, according to the 2021 Survey of Equipment Finance Activity (SEFA) released by the Equipment Leasing and Finance Association (ELFA). This marked the first time in a decade that businesses decreased their overall spending on capital equipment, according to the SEFA. However, the 7 percent decline was less than the double-digit drop expected as the COVID-19 pandemic gripped the world and transformed businesses. The 2021 SEFA reveals pandemic-era impacts and key statistical, financial and operations information for the $900 billion equipment finance industry, based on a comprehensive survey of 104 equipment finance companies.
“We are pleased to share the results of the 2021 Survey of Equipment Finance Activity,” says ELFA President and CEO Ralph Petta. “While 2020 certainly presented serious challenges, the equipment finance business, overall, showed remarkable resilience and durability, with the industry showing only a single-digit decline in year-over-year new business volume. This speaks to the strength of our industry as it equips American businesses to succeed and prosper. As we look to the future, more recent data collected in the first two quarters of 2021 suggest that equipment finance activity should accelerate as overall conditions in the U.S. economy improve.”
“We thank all the ELFA members who participated in the 2021 SEFA, without whom this leading industry data source would not be possible,” adds Bill Choi, ELFA vice president of Research & Industry Services. “We encourage all members to review the data and put it to work for you. If you have any questions about benchmarking your company, using our interactive dashboard or other SEFA tools, please don’t hesitate to reach out.”
Key findings for 2020 as reported in the 2021 SEFA include:
• New business volume decreased in 2020 after 10 consecutive years of growth. Following declines in new business volume in 2008 and 2009 during the Great Recession, volume increased year-over-year in 2010 through 2019.
• By organization type, banks saw a 10.3 percent decrease in new business volume, captives saw a 1.6 percent decrease and independents saw a 2.5 percent increase. By market segment, new business volume dropped 14.6 percent in the large ticket segment and 9.2 percent in middle ticket, while small ticket maintained their new business volume levels.
• From an asset perspective, the top-five most-financed equipment types were IT and related technology services, transportation, construction, agricultural and industrial/manufacturing. The top five end-user industries representing the largest share of new business volume were services, agriculture, industrial and manufacturing, wholesale/retail and construction.
• Use of electronic documents increased significantly in 2020 over 2019, as adoption of digital tools rose during the pandemic. The share of respondents who used electronic documents to fund at least some of their new business volume grew from 52 to 72 percent.
• Delinquencies rose just 30 basis points overall to 2.3 percent. Companies contacted customers early in the pandemic and devised individual deferral plans, keeping receivables current during the COVID-19 shutdown so that delinquencies would not spike sharply.
• Charge-offs also increased marginally overall to 0.48 percent of average receivables in 2020.
• Credit approvals remained steady year-over-year, as did the percentage of approved applications booked. Though the percentages remained steady, there was a sharp decrease in both the number of applications and the dollar volume from 2019 to 2020.
• Employment declined slightly (by 1.75 percent). Despite COVID-19 restrictions, respondents seemingly made adjustments so that remote working did not result in significant declines in employment.
In addition to the 2021 SEFA, ELFA released the 2021 Small-Ticket SEFA, which focuses on small-ticket and micro-ticket equipment transactions among the SEFA respondents. The report found that new business volume in the small-ticket space declined by 4.9% in 2020.
Access the Data
The 2021 SEFA data are available in a variety of formats at www.elfaonline.org/SEFA:
• Full SEFA Report: This 300-page report offer comprehensive performance metrics for 104 equipment finance companies.
• Interactive SEFA Dashboard: This online dashboard showcases executive summary data from over a decade of SEFA reports.
• MySEFA: This interactive data tool lets SEFA survey respondents track their own operational and performance statistics and compare them against their peers.
PricewaterhouseCoopers LLP administers the SEFA. The ELFA Research Committee provides support and direction in the development of the survey and the interpretation, analysis and presentation of the results. For more information, contact Bill Choi at [email protected].