ELFA Reports $9.5 Billion in New Business in May
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A survey of companies in the equipment finance sector saw overall new business volume hit $9.5 billion in May, according to the Equipment Leasing and Finance Association.
The ELFA Monthly Leasing and Finance Index found June 26 that new business volume increased 1% from the same time last year. But volume was down 2% from $9.7 billion in April. The report noted that cumulative new business volume was up 0.9% year-to-date compared with the same time span in 2022.
“MLFI respondents show steady new business volume for the month of May,” ELFA CEO Ralph Petta said. “As the Fed puts a pause on interest rate hikes and the U.S. economy refuses to accede to a recession — at least for the time being — equipment finance companies continue to do what they do best, i.e., provide the necessary capital for businesses to grow and prosper. A number of equipment finance executives polled recently have expressed a sense of heightened optimism that the industry will continue to show steady growth, at least in the near term.”
The ELFA index report also found receivables over 30 days increased to 2% year-over-year from 1.6%. The report noted charge-offs increased to 0.33% year-over-year from 0.12%. It also found credit approvals totaled 76.4%, down from 77.3% in April. The total headcount for equipment finance companies was down 2.5% year-over-year.
“We are cautiously optimistic about the stability of the economy based on both the recent indicators and what continues to be resilient demand from businesses,” said Daryn Lecy, vice president and chief operating officer at Oakmont Capital Services. “The tightened liquidity remains a concern, but we have seen some small signs of localized stabilization with previously shy banks and finance companies slowly showing interest in exploring equipment finance assets. Our industry provides great support during these times by continuously thinking creatively, remaining nimble, and finding niches and opportunities as they arise.”
The monthly index reports economic activity from 25 companies representing a cross-section of the $1 trillion equipment finance sector. The ELFA also reported separately that its monthly confidence index in June reached 44.1 compared to 40.6 in May.
“Consistent with the findings of the MLFI, Nexseer Capital has seen very strong growth in equipment finance originations over the last 12 months,” said Jon Albin, chief operating officer at Nexseer Capital. “We see economic conditions resulting in significant tightening of bank and senior credit lending. As a result, more businesses are looking to equipment financing companies to provide capital for growth and maintenance equipment needs.”
NEW RELEASE: New business volume in @ELFAOnline's May Monthly Leasing and Finance Index was up 1% Y/Y, down 2% M/M and up 0.9% YTD https://t.co/Won4lZx9my#economy #equipmentfinance #capex pic.twitter.com/IhrjycykCE — ELFA (@ELFAOnline) June 26, 2023
Leasing Solutions owner Steven Geller dismissed the 1% year-over-year increase as not all that significant. He believes the lower growth is the result of lenders and bankers becoming more restrictive toward the deals they would have approved in the past.
“A lot of lenders, banks, seem to be running out of money, à la Silicon Valley Bank and Signature Financial,” Geller said. “They’re running out of money to lend, and so what’s happening is that filters down into our industry insofar as reliable lenders are declining deals that in the past would’ve been approved and that they’re passing on good deals.” Geller added there is business that isn’t getting funded. He noted it’s been frustrating trying to get deals done since it is now harder to close business. But he does see opportunities for smaller leasing companies to step in where the larger lenders and banks have pulled back.
“This is an opportunity for leasing companies that have excess cash in their own account to fund their own deals,” Geller said. “I broker 95% of my deals. But I have cash in my account that’s just sitting there doing nothing. So if I can pick out a good deal, a very good deal that a lender won’t buy, I’ll buy it if the price is right, and the term is right, and it doesn’t use up all my cash in one shot.”
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