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 increased 6.5 percent when compared to the same period 2007.
The MLFI-25 reflects levels of equipment financed and complements other relevant economic indices, including the monthly durable goods report produced by 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. Along with the MLFI-25 these reports provide a complete picture that describes the use of productive assets in the U.S. economy: equipment produced, acquired and financed.
According to the May data, originations month-to-month remained flat, stabilizing at $7.2 billion. Respondents' portfolio performance improved: receivables in the less-than-30 day category were 97.0 percent in May, up slightly from the prior month. Charge-offs were almost flat when compared to the prior month, increasing one basis point to .78 percent.
Credit approval ratios (76.2 percent) increased 2.3 percent when compared to the prior month (73.9 percent). Total headcount has been relatively stable (showing only a slight decrease) since February 2008.
"Those expecting to see evidence of an overall slowdown in commercial equipment finance activity (or a significant decline in portfolio performance) as a result of the mortgage crisis, rising energy and food prices or a general economic slowdown may be surprised by this report," said William Verhelle, Chief Executive Officer, First American Equipment Finance, Fairport, NY. "Only in specific segments such as trucking, real estate and among some small businesses is there evidence of significant increased delinquencies and reduced new equipment financing activity. There does not yet appear to be an overall slowdown in the pace at which businesses are financing new capital equipment, nor is there a material deterioration in the portfolio performance of existing capital equipment receivables due to commercial lenders.
"It's possible that businesses are financing more capital equipment acquisitions to preserve cash, thereby accounting for the continued strong level of equipment loan originations.”
"Demand in the equipment finance sector appears to be picking up after an initial decline in the first quarter and credit quality shows little deterioration; business volume and portfolio quality are holding their own," said Kenneth E. Bentsen, Jr., ELFA President. "So far, we seem to be weathering the storm."