Equipment financing activity is picking up as lenders capitalize on increased business confidence while improving their balance sheets.
New business volume across the equipment finance industry rose 5.1% to $10.5 billion in October, according to the Equipment Leasing and Finance Association’s (ELFA) CapEx Finance Index, released Nov. 26. New business volume totaled $100.6 billion through October, up 3.7% year over year.
While the Federal Reserve’s 50-basis-point (bps) rate cut in September contributed to more originations, the sector’s “fundamental strength” was the main catalyst, ELFA President and Chief Executive Leigh Lytle stated in the report.
“Borrowers and lenders alike demonstrated resilience, with healthy credit approvals and robust balance sheets,” she said. “Looking ahead, this momentum positions the sector to confidently navigate the challenges of 2025, whether it’s a slower pace of rate cuts or ongoing inflationary pressures.”
Credit approvals in October dropped 50 bps to 75.1% and have been hovering between 75% and 77% for a little over a year. Charge-offs — unpaid debt written off as a loss — fell to 0.3%, the lowest mark since January 2023. Loan and lease payments more than 30 days past due rose 20 bps to 2.2% but remained near 2024 lows.
Expectations of lower interest rates after a second federal rate cut last month and reshoring in the heavy-equipment industry signal increased “investments in new technology, resources and production equipment” in 2025 and beyond, William C. Perry III, executive vice president and group head at Birmingham, Ala.-based Regions Equipment Finance, stated in the ELFA report. These investments “should equate to increased demand for structured leasing and equipment finance products.”
Independents drive growth
While equipment financing is projected to rise in 2025, banks may hesitate to fatten their portfolios due to tighter regulations and declining capital. Banks’ growing conservatism, however, is creating more opportunities for independent lenders, Kevin O’Connor, sales director at Northbrook, Ill.-based Beacon Funding, told Equipment Finance News.
“There have been different opportunities for us as an independent that we traditionally haven’t seen before, including manufacturing programs,” he said. “And we’ve had more opportunities on the distribution, the dealership, the vendor front, with a couple of players vacating a portion of that market as well. … So, we have a better blend of A, B and C transactions, whereas in the past, we might have seen more B and more C.”
The third annual Equipment Finance Connect at the JW Marriott Nashville in Nashville, Tenn., on May 14-15, 2025, is the only event that brings together equipment dealers and lenders to share insights, attend discussions on crucial industry topics and network with peers. Learn more about the event and register here.
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