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August 20, 2020 2:45 PM, EDT

Equipment Finance Leaders Report Improved Confidence

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Confidence in the equipment finance market rose in August, according to the Equipment Leasing & Finance Foundation.

Its monthly confidence index for the equipment finance industry was 48.4, an increase from the July index of 45.3, the foundation reported Aug. 20.

Additionally, it surveyed the impact of the coronavirus pandemic, which found nearly 90% of equipment finance companies offered payment deferrals or restructuring.

The index measures business conditions and expectations for the future as reported by key executives from the $900 billion equipment finance sector.

“There are numerous industry sectors that are performing well during the pandemic and are requiring financing for new equipment needs,” said John Wolfe, group manager at M&T Commercial Bank.

The survey asked respondents to assess their business conditions over the next four months. It found that 24.1% of executives believe business conditions will improve in that time. That is up from 21.4% in July. Some 51.7% believe business conditions will remain the same while 24.1% believe business conditions will worsen.

The survey also found that 17.2% of respondents expect more access to capital to fund equipment acquisitions over the next four months. This is up from 10.7% in July.

More executives expect to hire additional employees at 13.8%. The survey also found 31% believe their company will increase business development spending over the next six months.

“We are continuing to see opportunities in the marketplace,” said Michael Romanowski, president at Farm Credit Leasing. “We have seen some delay on projects; however, we have also seen an increase in opportunities with customers who were considering paying for investments with cash and are now looking to finance.”

The U.S. economy was not seen as excellent by any of the executives surveyed in August. This was unchanged from the previous month. About 48.3% see the economy as fair while 51.7% evaluate it as poor. However, an increasing number of executives believe the economy will get better over the next six months at 31% compared with 25.9% in July.

“To date, receivables have held up surprisingly well, which seems to indicate businesses were relatively healthy entering the crisis,” said Brian Madison, president at TrinityRail Leasing & Management Services. “The biggest concern is continued limited demand given the amount of uncertainty related to the spread of COVID-19.”

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The foundation also released highlights of its COVID-19 Impact Survey of the Equipment Finance Industry, designed to monthly track the impact of the pandemic. (It collected 98 responses Aug. 3-14.)

“I believe a lot of small under-capitalized companies will be out of business in the very short term,” said Steven Geller, owner of Leasing Solutions. “The industry will recover because there will always be a need for new equipment to run businesses. Lenders will be more careful and commit more due diligence in doing business and the providers of the business will need more lenders to be able to fund deals.”

The COVID-19 Impact Survey found 81% of companies have not furloughed or laid off employees. It also showed 89% of equipment finance companies have offered payment deferrals, including extensions, modifications or restructuring.

“Increased certainty following the presidential election this year will increase confidence as will more informed clarity regarding the COVID pandemic,” Wintrust Specialty Finance CEO David Normandin said.

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