Equipment finance industry confidence rebounds in January

Confidence among executives in the equipment finance industry continues to grow after a two-year low in November 2022, despite concerns about inflation and a possible recession. 

The Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) — an assessment of current conditions and future expectations from equipment finance sector executives — landed at 48.5 this month, an increase of 260 basis points (bps) month over month, but a decline compared with 63.8% in January 2022. 

Industry confidence is inching up after November’s low due in part to a belief that the U.S. economy will improve or remain the same in the first half of 2023, according to the index released by the Equipment Leasing & Finance Foundation. 

A growing percentage of executives is optimistic about the U.S. economy in 2023, with 7.7% of respondents believing that U.S. economic conditions will get “better” over the next six months, up from 0% in December 2022. 

Meanwhile, 57.7% responded that the U.S. economy will “stay the same” over the next six months, an increase from 48.2% last month. The remaining 34.6% believe U.S. economic conditions will worsen over the next six months, a decrease from 51.9% in December.

Should the U.S. economy ultimately worsen and enter a recession, not all equipment financers would be hit the same way. Aesthetic and non-essential use equipment would likely be most affected, as seen during the Great Recession, Brain Mulder, vice president of operations and program management at Raleigh, N.C.-based Fort Capital Resources, told this publication. Fort Capital Resources is an equipment and commercial finance lender with transactions up to $20 million and the capacity to service transactions in over 20 countries. 

Aesthetic equipment “got hit so hard because it was sort of just an extra money generator for companies, but it wasn’t necessarily the reason that the company was open,” Mulder said. “It wouldn’t surprise me if stuff like that starts getting hit again.” 

Cautionary optimism 

Executive confidence is increasing amid a positive economic outlook, but concerns remain. 

Most executives surveyed for the index do not expect business conditions in the equipment finance sector to change in early 2023. Looking forward at the next four months, 69.2% believe business conditions will remain the same, up from 55.6% in December. 

None of the respondents indicated that they expected business conditions to improve, down from 3.7% at the end of 2022. In contrast, only 30.8% believe business conditions will worsen, a decline compared with 40.7% in December. 

Industry slowdowns would mostly affect non-essential equipment, Fort Capital’s Mulder underlined. “As far as essential equipment goes, they still have to buy the equipment, so I haven’t seen a big change yet.”