In October, U.S. companies borrowed 8% less to finance equipment investments compared to the same month a year ago. High interest rates had a significant impact on some businesses, as reported by the Equipment Leasing and Finance Association (ELFA). ELFA tracks economic activity in the nearly $1-trillion equipment finance sector and surveys banks like Bank of America and financing affiliates of equipment makers.
Despite positive metrics in the U.S. economy, ELFA CEO Ralph Petta noted that there has been an increase in both losses and delinquencies among participants in the industry. This softness in credit quality can be attributed to the challenges faced by businesses operating in a higher interest rate environment, where they are constrained by reports of a pull-back in bank lending.
Dennis Bolton, Head of North America Equipment Finance at Gordon Brothers, commented on the trends observed by ELFA, stating that they are consistent with economic conditions and market turmoil resulting from quantitative tightening, inflation, employment, and supply chain disruption.
In October, U.S. companies signed up for $10.4 billion worth of new loans, leases and lines of credit, up from $9.7 billion a month ago, according to ELFA data. Credit approvals also improved month-on-month to touch 76% in October from 73.6% in September.
The Equipment Leasing & Finance Foundation (ELFF), which is affiliated with ELFA on a non-profit basis, reported its confidence index standing at 42.8 in November – an increase from 40.1 in October – indicating that businesses have a positive outlook for future investment opportunities despite current challenges associated with high interest rates and supply chain disruptions