One of ELFA’s most popular data resources was the subject of a recent webinar, “202l MLFI Survey Summary: Leveraging Data to Improve Performance.” Panelists Ralph Petta, President and CEO, ELFA; Richard Barry, President, Merchants Bank Equipment Finance; and Bill Choi, Vice President, Research & Industry Services, ELFA, provided key findings of the Monthly Leasing and Finance Index (MLFI-25) for 2021, historical trends and ways organizations can benefit from using the data.  

“The MLFI-25 is a great example of the association’s survey-based research, which relies on the input of ELFA members,” Petta said. “Member feedback enables benchmarking and predictive, actionable decision-making for businesses in a variety of areas.” The following are among the highlights from the discussion.

1. The MLFI-25 enables performance benchmarking. The same 25 ELFA member companies representing a cross section of the equipment finance industry are surveyed each month to provide a snapshot of the general direction of five key metrics: new business volume, accounts receivable, average losses (charge-offs), credit approvals and change in headcount. Through this collection of metrics, organizations can benchmark their operations and gauge their performance against industry peers. The MLFI-25 is also used in capital markets and funding source presentations, and widely reported in key business media as an indicator of capital expenditures (CAPEX) in the U.S. It’s a barometer of the health of the equipment finance sector and the extent of equipment demand in a given month.
2. The MLFI-25 mimics the economy’s performance. If the economy is doing well, so are equipment finance companies. During the height of the pandemic in 2020, new business volume (NBV) was down about 6 percent. In 2021, NBV was up almost 9 percent over the previous year. Historically, the index has had some minor declines, but it was hit the hardest during the Great Recession when NBV declined over 30 percent. Further emphasizing the economic significance of the MLFI, Choi said, “The MLFI is released the day before the durable goods report each month. Our analysis has shown a strong correlation between the two.”
3. 2021 MLFI-25 metrics were positive overall. Captives and independents performed well with positive growth in new business volume in all four quarters. Banks comprise the biggest segment of the MLFI-25 and in Q1 2021, they showed negative year over year quarterly growth, but remained in positive territory for the rest of the year. Receivables declined in December due mostly to the bank sector, while independents performed as well or better than the banks or financial institutions. Charge-offs are at their lowest levels in decades, and down 40 percent from two years earlier pre-pandemic. Credit approvals remain steady and have reached their highest level in three years. Year-over-year change in total number of employees has been significantly impacted by a reduction in one MLFI-25 reporting company’s workforce. However, examining the data with that company’s headcount removed shows the employment situation returned to positive growth territory in October 2021.
4. Equipment finance companies navigated well through the pandemic. The MLFI-25 has been compiled since 2005, and historical MLFI data show the industry impact of recessions and a number of economic cycles. Comparing the effects of the Great Recession with the pandemic, MLFI-25 data show that equipment finance companies were better able to cope with the potential crisis of COVID. Today receivables are at normal levels and charge-offs are at record lows. Barry said, “Our experience at Merchants and among my industry colleagues mirrored that of the MLFI. Things became acute in early 2020, and the vast majority of the industry worked very closely with our customers in going to deferrals, interest-only or principle-only payments or whatever we could do to support them through the rough times. As we’ve worked through that we’ve seen some real stabilization which reflects what the MLFI data show.”
5. December is traditionally the highest new business volume month. While December consistently has the highest level of new business volume each year due to the big end-of-year push of financial institutions, end-of-quarter new business volume is also usually higher than other months. Those with vendor partnerships serving as de facto finance arms, and vendors trying to meet quarterly and annual goals will put promotions in place using equipment finance companies to drive increased volume and activity. Many customers delve into tax planning more at the end of the summer/early fall and may determine tax and accounting benefits of securing additional equipment prior to year-end and taking the depreciation.
6. MLFI data is segmented for small ticket and financial institutions. The Small Ticket MLFI is a subset of the MLFI-25 companies whose total volume is comprised of 80 percent or more of small-ticket transactions. The Financial Institutions MLFI collects data from additional smaller banks not reporting in the MLFI-25, which is why the number of participating companies listed each month often exceeds 25.

“Membership in ELFA bestows on each individual and member company access to a variety of resources and business intelligence,” Petta said. “I encourage members to become aware of the information available like the MLFI-25 that is designed to help you perform better and operate your business more successfully.”

Learn More
A recording of the January 26 webinar and the webinar slides are available here.

The MLFI-25 is available at ELFA’s Knowledge Hub, the one-stop online library of industry research and information for the equipment finance industry.