The Equipment Leasing & Finance Foundation (the Foundation) released the August 2023 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market is 50.4, an increase from the July index of 46.4.

When asked about the outlook for the future, MCI-EFI survey respondent Dave Fate, CEO, Stonebriar Commercial Finance, said, “In spite of significant turmoil in the U.S. banking sector, including multiple downgrades and warnings from the rating agencies, as well as unprecedented interest rate increases over the past year, the equipment leasing and finance industry continues to persevere. Secured equipment loans and leases continue to outperform every other asset class. I would expect our industry to continue to deploy much-needed capital—which serves as a catalyst for the U.S. economy—across a diverse set of industries across the credit spectrum. Stonebriar continues to thrive in this environment with year-to-date originations through July 31 of $1.26 billion, up 28 percent year over year.”

August 2023 Survey Results

The overall MCI-EFI is 50.4, an increase from the July index of 46.4.

• When asked to assess their business conditions over the next four months, 3.6 percent of the executives responding said they believe business conditions will improve over the next four months, a decrease from 7.7 percent in July. 89.3 percent believe business conditions will remain the same over the next four months, up from 65.4 percent the previous month. 7.1 percent believe business conditions will worsen, a decrease from 26.9 percent in July.
• 10.7 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (CAPEX) will increase over the next four months, an increase from 7.7 percent in July. 78.6 percent believe demand will “remain the same” during the same four-month time period, an increase from 69.2 percent the previous month. 10.7 percent believe demand will decline, down from 26.7 percent in July.
• 7.1 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 7.7 percent in July. 78.6 percent of executives indicate they expect the “same” access to capital to fund business, up from 76.9 percent last month. 14.3 percent expect “less” access to capital, down from 15.4 percent the previous month.
• When asked, 22.2 percent of the executives report they expect to hire more employees over the next four months, an increase from 15.4 percent in July. 70.4 percent expect no change in headcount over the next four months, down from 76.9 percent last month. 7.4 percent expect to hire fewer employees, down slightly from 7.7 percent in July.
• 3.6 percent of the leadership evaluate the current U.S. economy as “excellent,” relatively unchanged from 3.9 percent the previous month. 85.7 percent of the leadership evaluate the current U.S. economy as “fair,” up from 80.8 percent in July. 10.7 percent evaluate it as “poor,” a decrease from 15.4 percent last month.
• 10.7 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 11.5 percent in July. 60.7 percent indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 53.9 percent last month. 28.6 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 34.6 percent the previous month.
• In August, 25 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 26.9 percent the previous month. 67.9 percent believe there will be “no change” in business development spending, up from 61.5 percent in July. 7.1 percent believe there will be a decrease in spending, down from 11.5 percent last month.

August 2023 MCI-EFI Survey Comment from Industry Executive Leadership

Bank, Small Ticket

“Hanmi’s Leasing Department continues to see steady demand for its funding services and as rates have started to stabilize, pricing has become less of an issue. We are fortunate to have long-standing partners that are loyal and experienced originators. Increased delinquency and default rates from recent historic lows have our attention as potential concerns and we continue to monitor our portfolio closely.” – Mike Coon, CLFP, First Vice President – Portfolio Manager, Hanmi Bank

Independent, Middle Ticket

“In the past three years, our industry was directly affected by three major issues: Covid, the unprecedented speed and size of Fed rate hikes, and the unexpected fallout from deposit stickiness in the banking industry. After each occurrence, the confidence index for our industry dropped and then after a few months started to recover. What this tells us is that we aren’t immune to these strong forces, but after they happen our industry reacts and finds a way to deal with them. This past resilience and agility are what give me confidence in the near-term future of our industry. There remain macro forces out there that we cannot control which could potentially impact every industry. These include an escalation of the war in Ukraine, further aggressive rate moves by the Fed, and the potential crisis involving loan refinancing for commercial office buildings. All of these are big unknowns, but if the past is a guidepost for the future, our industry will find a way to succeed.” –  Mike Rooney, Chief Executive Officer, Verdant Commercial Capital LLC