Nov. 12, 2023 - The equipment finance industry saw new business volume increase 6.3% in 2022, according to the 2023 Survey of Equipment Finance Activity (SEFA) released recently by the Equipment Leasing and Finance Association (ELFA).
That is a modest decrease from NBV growth of 7.4% in 2021.
The 2023 SEFA reveals key statistical, financial and operations information for the $1 trillion equipment finance industry, based on a comprehensive survey of 102 equipment finance companies.
“We are pleased to share the results of the 2023 Survey of Equipment Finance Activity. This comprehensive source of industry data is made possible by ELFA member companies who responded to the survey, and we thank them for their participation,” said Bill Choi, ELFA vp of research & industry services. “I encourage all members to review the data and put it to work for your business. If you have any questions about benchmarking your company, using our interactive dashboard or other SEFA tools, please feel free to contact me.”
Key findings for 2022 as reported in the 2023 SEFA include:
New business volume at equipment finance companies continued to be strong after rebounding in 2021 from the pandemic. Among survey respondents 75% experienced an increase in volume in 2022.
Cost of funds were a major takeaway of this year’s report with a jump of 211 basis points (bps) between 2021 and 2022 as a result of Federal Reserve interest rate hikes. Managing this cost of funds increase will be a major emphasis as equipment finance companies make their way through the current higher-interest-rate climate.
By organization type, banks saw a 7.4% increase in new business volume, captives remained flat and independents, representing a much smaller group, saw a 29.4% increase. By market segment, NBV rose a modest 0.2% in the large ticket segment, while it increased 7.3% year over year in both middle and small ticket.
From an asset perspective, the top-five most-financed equipment types were transportation, agriculture, construction, IT & related technology services, and industrial & manufacturing. The top five end-user industries representing the largest share of new business volume were services, agriculture, industrial & manufacturing, transportation and construction.
Use of electronic documents continued to grow with 88% of respondents reporting that at least some of their NBV is documented via an electronic document. This number has risen steadily over the past five years, up from 50% of respondents in 2018.
Delinquencies increased to 2.3% overall, from 1.1% in 2021, with mining/oil & gas extraction and transportation-railroad continuing to experience the highest delinquency rates.
Charge-offs decreased slightly to 0.22% of average receivables in 2022 due to a stronger recovery rate that was much higher than the previous years’ amounts.
Credit approvals increased year over year, while the percentage of those approved applications being booked declined slightly. The number of applications decreased, but the dollar volume increased, an indication of the inflation the overall economy is experiencing.
Employment increased by 3.8% overall. Independents, captives and banks increased their headcount by 8.5%, 4% and 2.5% respectively year over year.
Work location arrangements reveal hybrid models show no signs of abating. More than 90% said they spend some of their time working remotely, and 36% report they spend fewer than five days a month working in a company office location. By comparison, pre-COVID, 84% of the respondents’ workforces went to the office fulltime.
In addition to the 2023 SEFA, ELFA released the 2023 Small-Ticket SEFA, which focuses on small-ticket and micro-ticket equipment transactions among the SEFA respondents. The report found that new business volume in the small-ticket space increased by 7.5% in 2022.
PricewaterhouseCoopers LLP administers the SEFA. For more information, contact Bill Choi at firstname.lastname@example.org.
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $1 trillion 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 580 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. ELFA has been equipping business for success for more than 60 years. For more information, please visit www.elfaonline.org.