Nine of 10 equipment finance companies have offered payment deferrals, according the “Covid-19 Impact Survey of the Equipment Finance Industry” just completed by The Equipment Leasing & Finance Foundation. The Foundation defines deferrals as “extensions, modifications or restructuring.” About three-quarters of respondents expect the default rate to be greater this year than last.
“The short term will be challenging from a collection aspect,” said Dan Thompson, SVP, credit & risk management, Midland Equipment Finance, in response to the survey. “Certain industries continue to be depressed and I expect a rise in bankruptcies. I also expect asset values (revenue generating/hard assets) to further decline in value.
“The next one to three years should see a climb out of this situation; obviously an effective vaccine will have a huge impact on how the economy and people respond.”
The Foundation also released its August Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), which inched up to 48.4 from the 45.3 reported in July. The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $900 billion equipment finance sector.
When asked to assess their business conditions over the next four months, 24.1 percent of executives responding said they believe business conditions will improve over the next four months, up from 21.4 percent in July. Half believe business conditions will remain the same over the next four months, and one-quarter believe business conditions will worsen.
About 13 percent of the survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, down from 14.3 percent in July. One in five believe demand will decline, a decrease from 21.4 percent in July.
None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month. About 48 percent of the leadership evaluate the current U.S. economy as “fair,” up from 39.3 percent in July. Half evaluate it as “poor,” down from 60.7 percent last month.
About one in three respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 25.9 percent in July. About one in four believe economic conditions in the U.S. will worsen over the next six months, up from 18.5 percent the previous month.
Source: The Equipment Leasing & Finance Foundation
