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October Business Volume Up, Economic Slowdown in Sight

Nov. 22, 2022
October's new business volume is up 6% year-over-year, 11% month-to-month, and nearly 6% year-to-date.

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross-section of the $1 trillion equipment finance sector, showed that new business volume for October was $11.3 billion, up 6% year-over-year from new business volume in October 2021. Volume was up 11 percent from $10.2 billion in September. Year-to-date, cumulative new business volume was up nearly 6 percent compared to 2021.

Receivables over 30 days were 1.7%, up from 1.5% from the previous month and unchanged from the same period in 2021. Charge-offs were 0.18%, up from 0.17% the previous month and up from 0.16% in the year-earlier period.

Credit approvals totaled 77%, down from 77.3% in September. The total headcount for equipment finance companies was down 4.7% year-over-year.

Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in November was 43.7, a decrease from the October index of 45.

ELFA President and CEO Ralph Petta said,

“The equipment finance industry demonstrates its typical resilient nature, producing an increase in October new business volume despite months of interest rate hikes brought on by the Fed’s efforts to control inflation. Despite the specter of an imminent recession—as many economists predict—equipment finance organizations continue to do what they do best, i.e., help supply the nation’s businesses with productive assets that enable them to survive and thrive.”

James Currier, Chief Revenue Officer, Finloc USA Inc., said,

“By now there should be some consensus amongst economists and industry vets alike that the economy slowing down is not only predictable but intended—and necessary. We see it coming and know it's close. We just won't know what the severity and duration will be until we come out on the other side. Despite the rhetoric from drama-driven sources, it's unlikely that the sky will fall given our current quantitative tightening policies and practices. Tough, yes. Global economic catastrophe, probably not. We see the economic tightening as an opportunity for carriers to get back on track with normal equipment replacement cycles that have been postponed and explore new verticals. Business reorganizations will require lenders to adapt to changing practices and operations. It will not be business as usual for the foreseeable future, so it is our role as lenders and financing consultants to help manage difficult situations."

The MLFI-25 is the only near-real-time index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired,  and financed.

The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $1 trillion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 580 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers, and investment banks, as well as manufacturers and service providers. ELFA has been equipping businesses for success for more than 60 years. For more information, please visit www.elfaonline.org.