The Equipment Leasing & Finance Foundation presents the Equipment Finance in 2020: Special COVID-19 Impact Issue. This limited edition report in lieu of the annual Horizon Report contains forward-looking economic and industry insights related to the U.S. economy - including near- and medium-term economic risks and emerging industry trends - based on data provided by a wide range of equipment finance industry leaders and Keybridge. This year, the report focuses on the impacts of the COVID-19 pandemic and the related recession.
Key findings from the Equipment Finance in 2020: Special COVID-19 Impact Issue include:
- New Business Volume Growth. Despite decelerating investment spending in 2019, the equipment and finance industry saw new business volume growth accelerate to 4.7 percent. This was at least in part due to rising propensity to finance equipment and software acquisitions, which in turn was supported by the Federal Reserve lowering interest rates in the second half of the year.
- Industry Fallout. The equipment finance industry, like the rest of the economy, suffered at the onset of the coronavirus pandemic. The Federal Reserve slashed rates to zero and Congress enacted $3 trillion in stimulus measures for consumers, businesses, and state and local governments. Meanwhile, many lenders and most equipment finance firms offered temporary payment relief in an effort to “pause the payment clock” until the economy could restart.
- Equipment Vertical Performance. The industrial core of the economy — and several key equipment verticals along with it — have rebounded more quickly than initially anticipated. New business volume in the equipment finance industry staged a comeback, with some verticals (e.g., computers and software) benefitting from the pandemic as 30–40 percent of the U.S labor force transitioned to remote work. Other equipment verticals, such as aircraft, office equipment, and oil and mining equipment, continued to struggle due to the pandemic and resulting fallout.
- Industry Outlook. After the economy suffered its steepest and deepest decline in GDP since 1946, the outlook for the U.S. economy in 2021 is among the most uncertain on record. However, the business environment for equipment finance firms is expected to be more favorable in 2021, though performance will be highly sector-dependent. Banks are widely expected to step back from smaller-ticket deals and focus on core markets, which may provide an opportunity for independents to increase market share. Some industry consolidation may occur, particularly among firms with outsize exposure to industries that are heavily impacted by COVID-19. While a near-term spike in inflation appears unlikely, it is a potential development worth monitoring given the impact it could have on the industry.