The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for May declined by 41 percent when compared to the same period in 2008. Month-to-month new business volume actually increased 2.4 percent from April to May, from $4.1 billion to $4.2 billion.
The MLFI-25 reflects the volume of commercial equipment financed in the United States. It also complements other economic indices, including the monthly durable goods report from the U.S. Department of Commerce, which reflects new orders for manufactured durable goods, and the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together, these reports provide a complete overview of equipment produced, acquired and financed in the U.S. economy.
The MLFI-25 reported receivables over 30 days increased to 4.7 percent as compared to 4 percent in April and 3.2 percent during the prior-year period. Charge-offs decreased to 1.74 percent from 1.79 percent in the prior month. Credit approvals increased to 66.3 percent from 59.9 percent in April. Seventy-seven percent of participant companies reported that fewer transactions were submitted for approval during the month, due to tightening underwriting standards and lower demand. Total headcount for equipment finance companies showed a decrease of 0.9 percent in May.
“For the most part, customers are deferring or lowering capex acquisitions but the demand side appears reasonably strong in the upper end of the market as customers who traditionally paid cash begin to evaluate using equipment finance and leasing products to acquire equipment,” said Richard Remiker, senior vice president, chief administrative officer of RBS Asset Finance, Inc. an MLFI participant.
“New investment in capital goods by businesses continues at a tepid pace as 91 percent of MLFI participants report a decline in new business volume,” said ELFA President Kenneth E. Bentsen, Jr. “Further the vast majority report continued decline in customer demand along with continued tightening of underwriting standards and credit availability.”
Separately, confidence in the equipment finance market moved slightly higher in June from May, with a score of 51.8 compared to 49.2, according to a monthly confidence index released last week by the Equipment Leasing & Finance Foundation. Introduced in May 2009, the index reports an assessment of current business conditions and expectations for the future as reported by executives from the equipment finance sector.
The index is released globally at 9 a.m. EST from Washington, D.C. each month, the day before the U.S. Department of Commerce releases the durable goods report. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approvals (approved vs. submitted) and headcount for the equipment finance business. The survey measures these things through participating ELFA member equipment finance companies from sectors such as small ticket, middle-market, large ticket, bank captive and independent leasing and finance companies.