Economic Activity Survey covers leasing and finance index.
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Press Release Summary:
Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for U.S. equipment finance sector, showed overall new business volume for January declined by 23.7% compared to same period in 2008. Month-to-month new business volume decreased 50.6% from December to January, from $9.1 to $4.5 billion. Survey covers new business volume, aging of receivables, charge-offs, credit approval ratios (approved vs. submitted), and headcount for equipment finance business.
Original Press Release:
Equipment Leasing and Finance Association's Survey of Economic Activity: Monthly Leasing and Finance Index
New Business Volume Declines Year-Over-Year
Washington, DC, February 25, 2009- 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 January declined by 23.7 percent when compared to the same period in 2008. Month-to-month new business volume decreased 50.6 percent from December to January, from $9.1 billion to $4.5 billion.
The MLFI-25 is the only index that reflects the volume of commercial equipment financed in the U.S. The MLFI-25 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. Together with the MLFI-25 these reports provide a complete picture of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
Receivables over 30 days increased to 3.9 percent as compared to 3.8 percent in December. For the year, receivables over 30 days were 110 basis points greater than 2008. Charge-offs decreased to 1.41 percent as compared to 1.58 percent in the prior month. Credit approvals reached another historic low (65.2 percent). Sixty-three percent of participant companies reported that fewer transactions were submitted for approval during the month, as underwriting standards tightened. Total headcount for equipment finance companies showed a slight decline in December (1.9 percent).
"Although liquidity continues to be a key factor, the focus for many companies is improving the management of their receivables and finding ways to maintain recoveries in an environment where equipment values are rapidly declining," said Kenneth R. Collins, Jr., Chairman and CEO of Susquehanna Commercial Finance, Inc., located in Pottstown, PA, whose company participates in the MLFI. Collins is also ELFA's chairman-elect.
"Credit policies and procedures have and will continue to be tested as will the integrity of business models," said Collins. "We expect credit quality to continue to deteriorate through the second quarter of 2009 and that a number of weaker segments such as transportation, construction and some small businesses that have been surviving on dwindling cash reserves, could be culled by this recession. This perception could also lead to declines in overall new business as qualified financing candidates considering capital investments remain sidelined by uncertainty that the economy will stabilize or improve any time soon," said Collins.
"Our sector continues to suffer from lack of liquidity and declining demand due to the domestic and global recession," said ELFA President, Kenneth E. Bentsen, Jr. "At the same time, credit quality of our asset class, while showing some signs of deterioration, continues to outperform peers. However, until businesses regain confidence that we've reached bottom, and financial markets return to some sense of normalcy, we can expect a continued downward trend in new business originations, further undermining the long-term growth potential of the U.S. economy," said Bentsen.
About the ELFA's MLFI-25
The index is released globally at 9:00 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. More information on the Monthly Leasing and Finance Index, including methodology and participants is available below and at www.elfaonline.org/ind/research/
MLFI-25 Methodology
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved vs. submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
The results of each MLFI-25 are posted on the ELFA website. ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit www.elfaonline.org/ind/research/ for additional information.
ELFA MLFI-25 Participants
ADP Credit Corporation
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services Corporation
CIT
De Lage Landen Financial Services
Dell Financial Services
Fifth Third Bank
First American Equipment Finance
GreatAmerica
Hitachi Credit America
HP Financial Services
John Deere Credit Corporation
Key Equipment Finance
Marlin Leasing Corporation
National City Commercial Corp.
RBS Asset Finance
Regions Equipment Finance
Siemens Financial Services
Susquehanna Commercial Finance, Inc.
US Bancorp
Tygris Vendor Finance
Verizon Capital Corp
Volvo Financial Services
Wells Fargo Equipment Finance
About the ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $650 billion 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 over 700 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.
For more information, please visit www.elfaonline.org
