In October, U.S. companies borrowed 8% less to finance equipment investments compared to the same time last year, according to the Equipment Leasing and Finance Association (ELFA). High interest rates affected some businesses, which may have contributed to the decline in borrowing. Despite a set of strong economic metrics, ELFA reports that participants reported slight increases in both losses and delinquencies, indicating that some businesses are struggling to operate in a higher interest rate environment.
The softness in credit quality is consistent with the economic environment and market turmoil resulting from quantitative tightening, inflation, employment, and supply chain disruption. Dennis Bolton, Head of North America Equipment Finance at Gordon Brothers, explained that this is due to factors such as inflationary pressures on commodity prices and labor shortages in certain sectors.
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. Credit approvals also improved month-on-month, touching 76% in October, up from 73.6% in September. This suggests that despite the challenges faced by some businesses, demand for financing remains strong in the equipment finance sector.
The Equipment Leasing & Finance Foundation’s confidence index stood at 42.8 in November an increase from 40.1 in October indicating that while there are concerns about the economy and market conditions