Business Volume Increased in the Equipment Finance Sector in 2016

The equipment finance sector saw business volume increase 2.5% in 2016, according to the recently released 2017 Survey of Equipment Finance Activity (SEFA). That marks the seventh consecutive year businesses increased spending on capital equipment. For small-ticket equipment transactions, new business volume grew 10.7% in 2016, according to a companion survey.

“The equipment finance industry continues a slow-growth trajectory, mirroring a fundamentally sound—if unspectacular—U.S. economy during the past several years,” said
Equipment Leasing and Finance Association (ELFA) President and CEO Ralph Petta. “Despite a slowly rising interest rate environment, leasing and finance companies are profitable entities, with generally healthy portfolios and sustainable levels of returns.”

The growth rate reported in the 2016 SEFA was down from 2015’s rate of 12.4%. In 2016, independents saw a 12% jump in new business volume and banks reported a 5% increase, while captives noted a 5.9% decrease. The middle ticket segment saw the largest increase in 2016.

According to the survey, the top five most-financed equipment types were transportation, IT and related technology services, agriculture, construction and office machines. The top five end-user industries representing the greatest portion of new business volume were services, industrial and manufacturing, agriculture, transportation and wholesale/retail.

Delinquencies increased in 2016, with 1.8% of receivables over 31 days past due compared to the prior year’s rate of 1.5%. Net full-year losses or charge-offs increased and remained at 0.29% of average receivables. Credit approvals increased a bit also, while the percentage of those approved applications being booked and funded fell overall.

– Nicholas Stern, senior editor

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