Washington, DC, June 28, 2023 – The equipment finance industry is seeing a negative impact on business conditions due to recent bank failures and their attendant liquidity issues, according to the results of a new survey released by the Equipment Leasing & Finance Foundation (Foundation). The survey, “Impact of Bank Liquidity on the Equipment Finance Industry,” reveals that despite the majority of lenders (56%) expecting originations to increase in 2023, substantially more banks and captives feel that the impact of recent events was negative rather than positive for them. Independents, however, believe they will have more opportunities if banks tighten or restrict their small business lending activities. The survey was developed to track the immediate and long-term impact of the recent bank liquidity crises on equipment finance companies on a variety of factors.
Key Findings
Among the survey highlights, which break out the results by lender type, are:
- Overall impact. As a result of the recent liquidity crisis, 44% of banks expect a negative impact, 38% expect no impact, and 19% expect a positive impact. 37% of captives expect a negative impact and 63% expect no impact, while independents are equally split on positive, negative and no impact from liquidity issues.
- Deposits. 58% of bank respondents believe negative changes in deposit levels would reduce new transaction and funding activity. An equal number of respondents expect deposits at their banks to increase (36%) or remain the same (36%).
- Originations. 52% of banks, 70% of independents, and 33% of captives expect originations volume to increase this year.
- Cost of capital. All types of lenders expect their cost of capital to increase: 94% of banks, 79% of independents, and 67% of captives.
- Spreads. 63% of banks and 39% of independents believe their margin requirement or credit spread will increase, while only 25% of captives believe so.
- Duration of liquidity stress. 33% of all respondents said that liquidity stress is not currently an issue, 29% said it will be an issue for less than one year, 19% said it will be an issue for more than a year, 14% said less than six months, and 4% said less than three months.
- Syndication markets. 58% of Banks said they would reduce their purchasing, but only 15% said they would reduce their selling, likely foretelling a market imbalance with more sellers than buyers, though the difference was less extreme when all lender types are counted.
“This survey makes clear that almost all independents expect to benefit by recent events, while most banks, particularly smaller banks, and captives, expect a negative impact, at least for the short-to-medium term,” said Tom Ware, Foundation Research Committee Chair. “It also demonstrates the Foundation’s continued dedication to its mission to provide relevant, future-focused research data for the betterment of the equipment finance industry.”
Survey responses were collected from 78 equipment finance company executives during April 2023. Of the responses, 33 were from banks, 33 from independents, and 12 from captives.
Read the full survey results at https://www.leasefoundation.org/industry-resources/liquidity-survey/.
All Foundation studies are available for free download from the Foundation’s online library at http://store.leasefoundation.org/.
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The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that propels the equipment finance sector—and its people—forward through industry-specific knowledge, intelligence, and programs that contribute to industry innovation, individual careers, and the overall betterment of the equipment leasing and finance industry. The Foundation is funded through charitable individual and corporate donations. Learn more at www.leasefoundation.org.
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Media contact: Charlie Visconage, cvisconage@leasefoundation.org