Growth Companies

Equipment Financing Nosedives

New business volumes dropped substantially in July and are off 8% compared with 2015, says ELFA.
Vincent RyanAugust 25, 2016
Equipment Financing Nosedives

New business volume for equipment finance companies dropped 17% in July 2016 compared with the previous year and fell 30% month to month, the Equipment Leasing and Finance Association said on Wednesday, as the sector continued what ELFA’s president called a “rollercoaster ride.”

ELFA’s Monthly Leasing and Finance Index (MILFI-25), a barometer of U.S. capital spending, reports on the economic activity of 25 representative companies. It showed that July’s new business volume was $7 billion, down from a $10 billion spike in June. As of the end of July, new business volume for the year was $51.3 billion (see chart at bottom of story), off 8% compared with 2015.

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“Positive fundamentals in the U.S. economy, which include a recent strong jobs report, lower unemployment, and a bullish equities market are offset by sluggish overall growth in the U.S. economy and stagnant capex spending by businesses both large and small,” said ELFA President and CEO Ralph Petta. “As the presidential campaign moves into higher gear, it appears business owners continue their wait-and-see attitude toward investment in and expansion of their business operations.”

Aylin Cankardes, founder and president of Rockwell Financial Group, said, “The industry in general has experienced a more reserved approach to capex spending by customers during times of uncertainty as a result of unpredictable global market trends and political landscape. Some customers are still on the sidelines and delaying decisions in regard to equipment acquisition, which is consistent with ELFA’s data on lower business volume.”

ELFA’s measurements of credit quality showed a mixed performance. Receivables over 30 days were 1.3%, a decrease from the previous month and up from 1.01% in the same period in 2015. Charge-offs were 0.38%, down from 0.65% the previous month.

The percentage of borrowers that had their credit approved totaled 75.9% in July, down from 78.1% in June.