2025 Predictions in Equipment Finance

 

ELFA Reveals Game-Changing 2025 Predictions in Equipment Finance

JAN 16, 2025 - 5:58 am

The Equipment Leasing and Finance Association (ELFA) unveiled its 2025 equipment finance industry predictions. These insights highlight the trends, challenges and opportunities shaping the industry in the year ahead.

“As we look toward 2025, the equipment finance industry continues to play a pivotal role in driving innovation, sustainability, and economic growth,” Leigh Lytle, president and CEO of ELFA, said. “From advancing clean energy investments to leveraging AI and digital transformation, our predictions reflect how the industry is evolving to meet new demands and seize emerging opportunities.”

Key Predictions for 2025

• Focus on Reshoring and Domestic Manufacturing: As supply chain resilience remains a priority, equipment finance will play a key role in enabling the reshoring of manufacturing and investment in advanced production technologies.
• Interest Rate Sensitivity Drives Innovation: In a high-interest-rate environment, companies will explore flexible financing options like leasing and pay-per-use models to preserve capital and adapt to economic fluctuations.
• Expansion of Equipment-as-a-Service (EaaS): The rise of subscription-based and usage-driven financing models will continue, offering businesses more flexibility and alignment with operational needs.
• AI and Data Analytics Redefine Decision-Making: Equipment finance companies will increasingly adopt artificial intelligence and predictive analytics to enhance underwriting processes, assess risks and optimize customer experiences.
• Sustainable Financing Gains Momentum: The growing focus on sustainability is driving increased demand for financing solutions that support energy-efficient equipment, renewable energy projects and advancements in transportation technologies.
• Cybersecurity Becomes a Top Priority: As connected and IoT-enabled equipment becomes more prevalent, equipment finance providers will emphasize cybersecurity measures to protect customer data and assets.

U.S. economy will grow by 2.7%.

 

ELFF Industry Snapshot: U.S. Economy Projected to Grow by 2.7%

JAN 7, 2025 - 5:56 am

The Equipment Leasing & Finance Foundation released the 2025 Equipment Leasing & Finance Industry Snapshot, which summarizes the current conditions and projections for the U.S. economy and equipment finance industry.

Among the wide range of details in the Q1 2025 Snapshot:

• The foundation projects that the U.S. economy will grow by 2.7%.
• The U.S. economy expanded at 2.8% (SAAR) in Q3/24, a slight decrease from 3.0% growth in Q2/24.
• Three key factors boosted the U.S. economy in 2024 and set the stage for continued economic growth in 2025: a strong labor market, rising household wealth and resilient consumer spending.
• Economic tailwinds:
  • Q3/24 growth was primarily driven by consumer spending, supported by a boost in government spending and business investment.
  • Economic headwinds include negative growth in private inventories, residential investment and net exports.
  • Equipment and software investment is expected to grow at a 4.7% annualized pace in 2025.
  • Equipment and software investment expanded 7.5% in Q3/24 (annualized) after growing 7% in Q2/24. Growth was positive in seven of 12 tracked verticals.
  • Moderate growth is expected during the first half of the year with upside potential later in the year if inflation cools further toward 2%, and the Fed responds by further lowering interest rates.
• By equipment type:
  • Six of 12 verticals are exhibiting recent momentum that is stronger than historical norms, including computers and mining & oilfield machinery.
  • Investment growth in other industrial equipment and trucks appears set to shrink in the coming six months.
  • New business volume growth reported in ELFA’s CapEx Finance Index (formerly the MLFI-25) in October was up 11.9% Y/Y, 5.1% M/M, and up 3.7% YTD, outpacing the rate of inflation.
• Special Topic – Trump’s Second Term, An overview of three key policy areas in the new administration:
  • Tariffs: As an economic strategy, economic consequences and retaliation and uncertainty and opportunities
  • Taxes: The 2017 Tax Cuts and Jobs Act, impact of new legislation on investment and potential long-term implications
  • Industrial Policy: Policy priorities are likely to shift regarding renewable energy, domestic manufacturing and infrastructure development projects, with the effect on equipment demand unclear.

Equipment Finance Industry Confidence Up

 

Equipment Finance Industry Confidence Up Again in September

September 19, 2024, 07:15 AM

               

The Equipment Leasing & Finance Foundation (the Foundation) releases the September 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. Overall, confidence in the equipment finance market is 61.9, an increase from the August index of 58.4, and the highest level since January 2022. The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector.

When asked about the outlook for the future, MCI-EFI survey respondent Nancy Pistorio, President, Madison Capital, said, “Many firms, particularly small and medium-sized businesses, have been delaying equipment purchases, citing continued high interest rates and uncertainty about the economy amplified by the upcoming election. This ‘let’s wait and see what happens’ mindset has contributed to diminished demand for equipment financing. Assuming the Federal Reserve lowers rates this fall, and once the election is behind us, I think we will begin to see an increase in business volumes. Barring any prolonged adverse reaction from the financial markets to the election outcome, I anticipate a more robust December and first quarter 2025 for our industry.”

Small business owners say their business has grown

 

U.S. Bank: 73% of Small Businesses Have Grown Despite Labor Challenges

AUG 27, 2024 - 6:14 am

Almost three quarters (73%) of American small business owners say their business has grown in the last year, with even higher percentages for Black (84%) and Hispanic (80%) owners, according to the U.S. Bank 2024 Small Business Perspective.

According to the 2024 survey findings, many U.S. small business owners have been growing while also facing labor challenges, which include being understaffed (52%), navigating a more competitive labor market (77%) and struggling to increase their employees’ salaries to keep pace with inflation (65%). Survey data shows owners are taking several proactive steps to help their company attract and retain employees — such as the 83% who say they plan to offer flexible hours to support a healthier work/life balance.

At the same time, owners are embracing digital tools, with three quarters (75%) planning to focus on digital tools in the next 12 months to help reach their business goals. Small business owners are open to AI and automated solutions, with nearly seven in 10 (68%) seeing their benefit, and six in 10 (60%) having already implemented a solution with AI or automation. However, they have some concerns (see visual) with 47% of owners being worried that their company could be replaced with automation.

“Small business owners continue to show resilience and optimism despite feeling impact from ongoing stressors such as the economy, changing labor market dynamics, higher prices and wages and other macroeconomic factors,” Shruti Patel, chief product officer for business banking at U.S. Bank, said. “The survey also reinforces the importance they place on digital tools in increasing efficiency and productivity. As small businesses owners rely more and more on software to manage their operations, U.S. Bank is focused on bringing our clients a seamless integrated experience across banking and payments to help streamline their cashflow and workflow.”

This survey includes input from 1,000 small business owners and 1,000 small business employees, as well as an additional sample of 300 Hispanic and 300 Black owners.

Small Business Owner Top Stressors and Their Impacts

Small business owners reported their top five macroeconomic stressors this year as:

§  Competition (73%)

§  Economic environment (71%)

§  Inflation and the increased costs of materials/supplies (65%)

§  Supply chain disruptions (47%)

§  Obtaining enough funding to support their business (42%)

In an election year, almost a third (31%) of small business owners also ranked the political environment as a top stressor.

When considering the implications of their top stressors, nearly half (49%) said these factors were delaying their ability to grow their business at the rate they had wanted. More specifically, 48% of those who cited competition and 39% of those who cited supply chain disruptions as their top stressor said these were delaying their ability to grow. However, those who cited economic environment (53%) or inflation and increased costs (58%) as their top stressor said these factors were decreasing their revenue.

Firefighting Robots

Spotlight on a new Robotic Solution to help combat fires...

 As various regions across the U.S. and around the world deal with devastating wildfires, innovation is continuing with new tools to help incident commanders and line crews to quickly control fire while saving lives.

Chinese robot manufacturer Guoxing Intelligent recently unveiled its latest tool for firefighters, extending its current firefighting robot lineup. Since 2004, the company has been building systems including firefighting robots, security robots, and military robots.

Firefighting Robots can provide support in a variety of situations by going where it is too dangerous for human firefighters. This includes situations where smoke or toxic chemicals would make it dangerous for people to get close enough to suppress a fire.

Guoxing robots can all be teleoperated to keep firefighters a safe distance from a conflagration. The autonomy features of Guoxing robot vary, depending the use case.

Becoming an Overnight Success

 

Highly recommend a great "follow": www.bruceturkel.com, I enjoyed his most recent article, I have been in the equipment finance business for over 40 years, thought this was spot on....enjoy....

My friend David Altshuler is one of the most recognized educational consultants in the country. If your college-age kid can’t decide whether to take a full-ride scholarship to MIT or Stanford or whether they should spend the afternoon locked in their room cutting themselves or trying meth, David is the guy you call.

David is on the speed dial of most therapists who deal with adolescent issues. When they need an expert to show parents how to help their kids thrive, they call David.

And when newly minted MSWs and PhDs are ready to open their own therapeutic practices, they call David.

“I want to do what you do,” they say. “I want to help families and kids. You make it look so easy. How’d you do it?”

The answer they all want is that all they need to do is do their best. Provide excellent service and help families, and their businesses will take off. They want the old movie line, “If you build it, they will come,” to be their storyline.

But the truth is it takes an awful lot of hard work to get to where David is. In addition to his advanced degrees, years of experience, and constant study, David has written 3,248 blog posts and seven books on helping kids thrive. He has also visited almost every accredited college and university in the United States and evaluated hundreds of therapeutic programs.

In other words, David became an overnight success after 40 years.

How can you be an Overnight Success?

My friend Bill Stainton is a renowned professional speaker and humorist. If you’re ever lucky enough to see Bill on stage, and you can stop laughing long enough to think about what he’s doing, you’ll be amazed at how he makes it all look so effortless. Bill’s so good on stage that many people who line up to chat with him after a talk ask the same question: “You’re so funny. You know, I’m funny, too. How can I be a professional speaker like you?”

Of course, Bill’s audiences don’t see the years of hard work, rehearsal, and study that got Bill to where he is today. They probably don’t realize Bill was in the cast of Seattle’s Almost Live!, the pioneering comedy show that earned him 29 Emmy awards and had a time slot that pushed SNL half an hour later. Or that Bill worked with Jerry Seinfeld, Ellen DeGeneres, and Bill Nye the Science Guy. Or that Bill has written for HBO, Comedy Central, and The Tonight Show. Or that Bill has been a hard-working member of The National Speakers Association and is an honored member of their Speaker Hall of Fame.   All they see is the effortless stagecraft that Bill earned through his decades of hands-on experience. 

In other words, Bill became an overnight success after 40 years.

Of course, Bill and David were highly successful long before they’d been in their respective careers for 40 years. As talented as they are, they were overnight successes after 15 or 20 years. However, the point remains: becoming world-class successes like Bill and David ain’t easy. It takes years and years of hard work.

How can you be an Overnight Success?

A man strolled down Madison Avenue in New York City when a harried-looking tourist approached him.
“Do you know how to get to Carnegie Hall?” the tourist asked.

“Of course,” the New Yorker answered. “Practice, man, practice.”

Current State of US Manufacturing

What is the current state of US manufacturing right now and for the rest of 2024?

Overall, US manufacturing is on the back side of the business cycle. Looking at the different sectors, the majority are either in Phase C, Slowing Growth, or Phase D, Recession.

Our expectation for the rest of this year is sluggishness. The downturn will be relatively mild due to onshoring and government subsidies into certain parts of manufacturing. Think of the CHIPS and Science Act and the high-tech sector for manufacturing production. Chips, communications equipment, computers – those are getting a boost. That will help mitigate the overall US manufacturing decline. I would characterize it more as generally flat with a downward bias.

When you prepare for downturns, if you have those strategic Management Objectives and know when to implement them, it is a lot easier to lead with confidence through such tougher periods.

Is it time to review your utilization of customer financing programs as an important component of your total (and comprehensive) sales strategy? Call me at (954) 224-3390 to discuss how simple and easy it is to implement a successful customer financing strategy! 

Increased Bankruptcy Filings

 

Epiq: Commercial Chapter 11 Filings Increased 70% in First Half of 2024, Total Filings Increased 7%

JUL 3, 2024 

The 987 total commercial chapter 11 bankruptcies filed during the first six months of 2024 represented a 70% increase over the 582 filed during the same period in 2023, according to Epiq AACER, a provider of U.S. bankruptcy filing data.

All chapters increased in June 2024 compared to June 2023. Overall commercial filings registered 2,743 for the first half of 2024, representing a 27% increase from the commercial filing total of 2,154 for the first half of 2023. Small business filings, captured as subchapter V elections within chapter 11, totaled 306 in the first six months of 2024, a 76% increase from the 174 elections during the same period in 2023.

“Commercial filing trends continue to show strong double-digit percentage increases in year-over-year filings, while individual filings increased at a much lower rate compared to commercial filings in the first half of 2024,” Michael Hunter, vice president of Epiq AACER. “I expect a strong demand in individual filings ahead of us, especially considering the large increase in commercial filings, consumer debt levels, high interest rates and overall increased costs with relatively flat household income. The time frame from the onset of individual financial stress to a bankruptcy filing is generally six to 18 months.”

Total bankruptcy filings were 40,262 during the first six months of 2024, a 7% increase from the 37,790 total filings during the same period a year ago. Total individual filings registered a 5% increase, as the 37,519 filings during the first half of 2024 were up from the 35,636 filings during the first six months of 2023. The 15,228 individual chapter 13 filings in the first half of 2024 represent a 2% increase over the 14,991 filings during the same period in 2023.

“The continued increase in bankruptcy filings reflects the growing economic strain on businesses and households,” Amy Quackenboss, executive director of the American Bankruptcy Institute, said. “We hope that efforts continue on Capitol Hill to reinstate higher debt-eligibility limits for small businesses and chapter 13 filers to create greater access and a more efficient process for small businesses and families to achieve a financial fresh start.”

Due to a statutory sunset that was unable to be extended by Congress before June 21, the enhanced subchapter V debt limit established in March 2020 dropped from $7.5 million to $3,024,725, and the chapter 13 threshold of $2.75 million for both secured and unsecured debt reverted back to a two-part test limiting eligibility to a maximum of $465,275 for unsecured debt and $1,395,875 for secured debt.

Sen. Richard Durbin (D-Ill.), who, along with a group of bipartisan senators, had introduced S. 4150 on April 17 to extend the enhanced limits for subchapter V elections and chapter 13 filers for an additional two years, has vowed to continue to try to restore greater access for small businesses and consumers. ABI’s Subchapter V Task Force in its final report and recommendations to Congress supports an eligibility limit of $7.5 million in aggregate noncontingent, liquidated debt for small businesses looking to reorganize under subchapter V.

Halfway Point 2024

 

Are your bookings on track with your projections?

Is your revenue on track to meet your year-end goal?

Throughout this cycle, there is noteworthy variability across markets. A mixed bag of market expectations for the second half of the year could create drag on your business or provide you some nice lift as you look to meet your goals by the end of the year. For instance, US Industrial Production is plateauing and will generally vacillate around this level through the remainder of 2024. By contrast, the services side of the economy is growing and will continue to do so for the remainder of the year.

Even within these larger segments, there is variability that could impact your outcomes.

• US Defense Capital Goods New Orders are in recession (5.0% below the year ago level), but the trend is expected to reverse and defense spending will rise by the end of the year.
• US Heavy-Duty Truck Production is 3.4% above the prior year, but Production will end 2024 3.9% below 2023.
• US Single-Unit Housing Starts are up 13.5% and the rate of growth will slow to 6.3% by the end of the year.

Your future is not mandated by the various market trends, but it is certainly influenced by them. Having the appropriate benchmarks and outlooks for your business can help you get a better read on the future and give you the power to navigate through uncertain times.

Many markets will finish 2024 weaker than 2023. Is your business prepared? If not, you may find yourself cutting expenses to preserve EBITDA. However, cut carefully. Growth is projected to return for many markets in 2025, and you do not want to be left behind should you not have the resources in place to capture new opportunities.

This does not mean that 2025 is all smooth sailing. While we anticipate growth returning to many industries that year, not all industries will recoup the losses. The following are examples of industries that will grow in 2025 but will not surpass their current level of activity:

• US Construction Machinery New Orders
• US Computers & Electronics New Orders
• North America Light Vehicle Production

Ensure you have the right benchmarks for your business so that the actions you take now are not just reactionary to the current market environment but are helping you better align yourself for future growth.

For further insights and additional information on the above markets, as well as many others, each month, start your ITR Economics Trends Report™ subscription today.

Traction for As A Service" Financing

 

The flexibility and scalability of “as-a-service” has the potential to change the way robotic solutions are implemented at the customer level.  Deploying robotics requires far more than buying a machine and plopping it down on a factory floor.  As a result,  As A Service solutions have increased in popularity.  Below is an excerpt from an A3 article on the subject: 

“As-a-service” models are defined by a good or service being made available “as needed” (this could be monthly pricing or usage based pricing). Upfront costs are usually negligible or non-existent. Contract lengths are flexible, allowing users to take advantage of the good or service only as they need it. The business assumes the responsibility for servicing and upgrades throughout the duration of the contract. 
These models have exploded in popularity due to the instant flexibility, scalability, risk reduction, and cost-savings that they enable, particularly in this era of unprecedented uncertainty and rapidity of change.
“As-a-service” business models are rapidly gaining traction across many verticals.  According to Forrester, businesses should prepare to compete with “anything-as-a-service.”

Flexible financing programs, such as leases, have existed in the robotics industry for a long time. However, those models only relieve a portion of the complexity of a true “robotics-as-a-service” offering.

Equipment Finance Outlook

 

Equipment Finance Outlook: Tightening Credit, Fluctuating Demand, Economic Uncertainty

By: Equipment Finance Advisor Staff Writer Date: May 20, 2024 @ 07:00 AM Filed Under: Industry Insights

According to the 2024 Equipment Leasing & Finance U.S. Economic Outlook Q2 Update, released by the Equipment Leasing & Finance Foundationin April, real equipment and software investment growth is projected to be 2.2 percent in 2024. The report further states investment activity is expected to pick up in the latter half of 2024 and forecasts real GDP growth of 2.3 percent this year, an improvement over the 1.7 percent growth forecasted in the Foundation’s 2024 Economic Outlook published in December 2023. Additionally, the report indicates that business lending standards for Commercial and Industrial loans tightened in Q4 2023 with a net 15 percent of banks reporting tightening standards for loans to large- and middle-market firms, and 19 percent reporting tighter standards for loans to smaller firms.

“As-a-service” models

 

First, what are“As-a-service” models, and why are they gaining popularity?

“As-a-service” models are defined by a good or service being made available “as needed” (this could be monthly pricing or usage based pricing). Upfront costs are usually negligible or non-existent. Contract lengths are flexible, allowing users to take advantage of the good or service only as they need it. The business assumes the responsibility for servicing and upgrades throughout the duration of the contract. 

These models have exploded in popularity due to the instant flexibility, scalability, risk reduction, and cost-savings that they enable, particularly in this era of unprecedented uncertainty and rapidity of change.

“As-a-service” business models are rapidly gaining traction across many verticals. This is a well-documented trend in the software space; software-as-a-service (SaaS) is now the industry norm, and is far more common than on-premise solutions that dominated the industry in the 90s. This trend is not limited to software. According to Forrester, businesses should prepare to compete with “anything-as-a-service.”

Flexible financing programs, such as leases, have existed in the robotics industry for a long time. However, those models only relieve a portion of the complexity of a true “robotics-as-a-service” offering.

The flexibility and scalability of “as-a-service” has the potential to change the way manufacturers operate. 

So what does a complete “robotics-as-a-service” model look like? 

Manufacturers know that deploying robotics requires far more than buying a machine and plopping it down on a factory floor. Every application has a unique task to execute within a specific process. The fun (and challenging!) aspect of this specificity is the considerable amount of work that goes into application design and engineering before a robot is ever procured and deployed. It is also important to consider the hard costs of both the robotics and ancillary components like grippers and sensors.

Automation as a vital investment even as economic headwinds persist

Great article in today's Monitor Daily confirming the fact that this is a "hot" time for automation sales.  Have you implemented a comprehensive customer financing strategy to help leverage more business?

In a recent study completed by Secured Research, only 17% of middle market food and beverage manufacturers were cutting capex spend going into 2024. An impressive 64% planned on increasing investments in automation by 20% or more in the next 24 months.

Middle Market food and beverage manufacturers face the dual challenge of staying ahead of the competition and managing a shrinking labor market. The pressing need for efficiency and consistency in production has led many to turn towards automation as a vital investment even as economic headwinds persist.

64% of middle market food and beverage manufacturers plan on increasing investments in automation by 20% or more in the next 24 months. Only 17% plan cuts.

Link to Story:   Why Mid-Sized Food and Beverage Manufacturers Must Invest in Automation >>>