New business volume in the equipment finance sector declined year over year in March but shot up from February.
Overall new business volume in March was up $9.3 billion, up18% from $7.9 billion in February, but down 7% compared with March 2023, according to data from the Equipment Leasing and Finance Association.
“Some pullback in new business volume in March largely reflects the effect of banks tightening their lending,” ELFA President and Chief Executive Leigh Lytle said in a statement. “Interestingly, results of an informal poll of respondents indicate some customers are limiting their equipment acquisitions until interest rates come down, which supports our foundation’s forecast that equipment and software investment should pick up in the latter part of the year when the Fed is expected to begin its rate cuts.”
BY THE NUMBERS:
- Cumulative new business volume for 2024 was up 0.5% compared with 2023.
- Receivables over 30 days past due were 2.1%, down from 2.2% the previous month but up from 1.9% in March 2023.
- Charge-offs were 0.5%, up from 0.4% last month and 0.3% in March 2023.
- Credit approvals increased to 77% from 76% in February.
- Total headcount for the 25 equipment finance companies surveyed was up 1.5% year over year.
“Instead of a customary end-of-quarter spike, banks saw originations fall more than 20% in March, while other respondents enjoyed a stronger month,” Lytle said in the release. “Credit quality is mixed, with receivables continuing to improve while charge-offs ticked back up.”
Some lenders said they are seeing a downturn in overall applicants but a slight uptick in their borrowing potential. Scottsdale, Ariz.-based Global Financial and Leasing Services is seeing “better quality applicants, in general, coming to us even though the quantity is less,” Jim Jenks, founder and chief executive, told EFN last week.
Separately, the Equipment Leasing and Finance Foundation’s recent second-quarter economic outlook report showed that 25% of medium and large banks saw less commercial and industrial loan activity in Q4 2023. Some 22% of smaller lenders also saw a downturn in loan applications.
“There was much confidence as we entered this year that originations and portfolio performance would continue to improve as witnessed by the strength of the U.S. economy,” Philadelphia-based LEAF Commercial Capital CEO Miles Herman stated in the outlook. “However, the punch bowl may have been taken away with March’s inflation report. We are seeing industry benchmark rates returning to November levels. As a result, the thought of a Fed rate cut may be delayed.
“Middle market businesses had seemed more optimistic in Q1 to spend, but CFOs may hit the pause button as well,” he said. “All this suggests rougher waters to navigate over the next few months on both sides — front-end originations and back-end portfolio management.”
