Equipment finance lender confidence reached its highest level in 32 months in September as lender expectations for the industry and wider economy improved.
The Equipment Leasing and Finance Foundation’s (ELFF) Monthly Confidence Index rose to 61.9 in September, up from 58.4 in August and 50.3 in September 2023. The last time the index was that high was January 2022, when it was 63.8.
Forty percent of equipment finance executives expect business conditions to improve over the next four months, up from 37.5% in August, according to an ELFF news release on Sept. 19. Meanwhile, 52% expect conditions to remain the same in that time, up from 45.8% in August, and only 8% expect conditions to worsen, down from 16.7% last month.
With the Federal Reserve lowering interest rates on Sept. 18 and the U.S. presidential election in November, a more robust equipment finance market in the next four months seems likely, Nancy Pistorio, president at Madison Capital, said in the ELFF release.
“Many firms, particularly small- and medium-sized businesses, have been delaying equipment purchases, citing continued high interest rates and uncertainty about the economy amplified by the upcoming election,” she said in the release. “Barring any prolonged adverse reaction from the financial markets to the election outcome, I anticipate a more robust December and first quarter 2025 for our industry.”
Despite wariness from some lenders about the election, optimism persists in the equipment finance industry as project spending persists, Brian Rosa, president of commercial finance at Mitsubishi HC Capital America, told Equipment Finance News.
“Like most election years, I think people are approaching the remainder of 2024 with a bit of caution, although I do think it’s cautious optimism,” he said. “In regard to the economy, it seems like a soft landing is realistic, and perhaps we’ve dodged any type of major recession. We know companies, and we’re seeing it, are still spending on [capital expenditures] and large projects.”
Rising demand confidence
Demand for leases and loans to fund capital expenditures is expected to increase over the next four months, according to 44% of survey respondents, up compared with 41.7% in August. Fifty-two percent of the executives in the survey expect demand to be similar during the next four months, up from 37.5% last month. In contrast, 4% of executives expect demand to drop, down from 20.8% in August.
While the demand outlook for loans and leases indicated optimism, lenders still need to adapt and manage their portfolios, David Normandin, president and chief executive officer at Wintrust Specialty Finance, said in the ELFF release.
“While there are many examples of uncertainty to point to today, I find businesses are adapting and finding ways to win, and it is an opportunity for us to adapt and grow with them,” he said. “Even with solid liquidity, delinquency and portfolio performance are challenging for many, so credit discipline is required more now than over the last few years.”
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