The Equipment Leasing & Finance Foundation (the Foundation) has released the November 2020 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $900 billion equipment finance sector. Overall, confidence in the equipment finance market is 56.1, an increase from the October index of 55.
The Foundation also released highlights of the COVID-19 Impact Survey of the Equipment Finance Industry, a monthly survey of industry leaders designed to track the impact of the coronavirus pandemic on the equipment finance industry. Fifty-five survey responses were collected from Nov. 2-13, on a range of topics, including payments deferrals, defaults, and staff analysis. Fifty-four percent of companies expect that the default rate will be greater in 2020 than in 2019, down from 56 percent in October; 35 percent expect it to be the same, unchanged from last month; and 11 percent expect it to be lower compared to 9 percent last month. Only 4 percent of lenders reported having more than 10 percent of their portfolio now under deferral, down from 7 percent of lenders last month. The largest percentage of respondents (69 percent) have 0.01-4.99 percent of dollars outstanding currently under payment deferral in their owned portfolio. Comments from survey respondents follow MCI-EFI survey comments below, and read additional survey results and analysis.
[Note: Some MCI and COVID-19 Impact survey questionnaires and comments were submitted before Election Day results were publicized.]
When asked about the outlook for the future, MCI-EFI survey respondent Michael Romanowski, president, Farm Credit Leasing, says, “All eyes are on the election. Depending on what shakes out with the political environment will impact businesses’ longer-term plans for investment. The present environment is on shaky ground and fiscal stimulus is needed to stop the tremors.”
November 2020 Survey Results:
The overall MCI-EFI is 56.1, an increase from the October index of 55.
• When asked to assess their business conditions over the next four months, 26.9 percent of executives responding said they believe business conditions will improve over the next four months, down from 29.6 percent in October. 53.9 percent believe business conditions will remain the same over the next four months, an increase from 51.9 percent the previous month. 19.2 percent believe business conditions will worsen, an increase from 18.5 percent in October.
• 19.2 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 22.2 percent in October. 69.2 percent believe demand will remain the same during the same four-month time period, an increase from 66.7 percent the previous month. 11.5 percent believe demand will decline, relatively unchanged from 11.1 percent in October.
• 23.1 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3 percent in October. 76.9 percent of executives indicate they expect the same access to capital to fund business, an increase from 66.7 percent last month. None expect less access to capital, unchanged from the previous month.
• When asked, 30.8 percent of the executives report they expect to hire more employees over the next four months, up from 25.9 percent in October. 57.7 percent expect no change in headcount over the next four months, a decrease from 63 percent last month. 11.5 percent expect to hire fewer employees, relatively unchanged from 11.1 percent in October.
• None of the leadership evaluate the current U.S. economy as excellent, unchanged from the previous month. 76.9 percent of the leadership evaluate the current U.S. economy as fair, up from 55.6 percent in October. 23.1 percent evaluate it as poor, down from 44.4 percent last month.
• 34.6 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, an increase from 25.9 percent in October. 50 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 59.3 percent last month. 15.4 percent believe economic conditions in the U.S. will worsen over the next six months, up from 14.8 percent the previous month.
• In November, 26.9 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 22.2 percent last month. 69.2 percent believe there will be no change in business development spending, a decrease from 70.4 percent in October. 3.9 percent believe there will be a decrease in spending, down from 7.4 percent last month.
November 2020 MCI-EFI Survey Comments from Industry Executive Leadership:
Bank, Small Ticket
“Following the distraction of the election, business will get re-focused on winning with whatever the new rules of engagement are and will continue to find ways to win,” states David Normandin, CLFP, president and CEO, Wintrust Specialty Finance.
Independent, Middle Ticket
“We believe better health outcomes related to the pandemic (therapeutics, forthcoming vaccine) coupled with more government stimulus will allow business formation and capital expenditures to return to a more normal pace,” says Bruce J. Winter, president, FSG Capital Inc.
Executive Comments from COVID-19 Impact Survey of the Equipment Finance Industry:
Bank, Small Ticket
“Over the near term we expect continued volatility due to the election and impact of the continued COVID pandemic until such time as a vaccine is developed and accepted. Mid- and long-term we expect continued growth due to the resilient nature of the U.S. economy and our industry,” says Kirk Phillips, president & CEO, Wintrust Commercial Finance.
Independent, Middle Ticket
“Our portfolio is comprised of all investment grade credits so we have not seen any defaults due to COVID-19 impact. We have not received any requests by our customers for deferral of rents,” states Aylin Cankardes, president, Rockwell Financial Group.
“The short-term effect will depend on the outcome of the election for my company as we are 100 percent oil and gas,” says Tracy Trimble, president, U.S. Global Asset Investments LLC.
To participate in the COVID-19 Impact Survey of the Equipment Finance Industry: The Foundation invites all regular ELFA member companies to participate each month. Survey responses are limited to one per company. If you did not receive a survey and would like to participate, please contact Stephanie Fisher, [email protected], by Nov. 30, to determine eligibility for inclusion in the December survey.