Credit is becoming more accessible across the United States as U.S. Treasury yields, influencing the cost of debt like mortgages and corporate bonds, have retreated from recent highs. This easing of credit conditions is seen as a positive indicator for economic health, potentially averting a long-feared recession. Despite the Federal Reserve not reducing interest rates, investors are anticipating future rate cuts, leading to a decline in Treasury yields.
The reduced demand for additional yield on corporate bonds compared to safe Treasurys is lowering borrowing costs for businesses. This has resulted in a surge in the issuance of investment-grade corporate bonds, reaching near-record levels. Even riskier companies are re-entering the debt market, a positive sign for investors concerned about broader economic issues associated with low-rated businesses.
The shift towards a more favorable environment for borrowers is evident in the decline of secured speculative-grade bonds, indicating increased confidence among businesses. The improvement in debt market activity extends to speculative-grade corporate loans, with companies lowering interest rates on existing loans and a rising volume of loans to raise new capital.
Borrowing conditions have also improved beyond the corporate debt market. Concerns about credit scarcity for small and medium-sized businesses following the Silicon Valley Bank failure have eased, with data showing a decline in banks tightening lending standards. Consumers are increasing their borrowing, particularly in mortgage applications, driven by falling interest rates. Asset-backed securities issuance, backed by various debts like credit cards and auto loans, has experienced a surge.
Despite prolonged concerns about a recession, some analysts suggest that the economy and credit markets may be at the beginning rather than the end of an economic growth cycle.
In the calendar year 2023, commercial Chapter 11 filings saw a significant surge, increasing by 72 percent to reach 6,569, compared to the previous year’s total of 3,819. This data is sourced from Epiq AACER, a provider of U.S. bankruptcy filing information.
Overall commercial filings, inclusive of various chapters, experienced a 19 percent rise, reaching 25,627 from the previous year’s 21,479. Notably, Subchapter V elections within Chapter 11 demonstrated substantial growth in calendar year 2023, with 1,939 filings, representing a 45 percent increase from the 1,334 recorded in 2022.
The broader context of total bankruptcy filings in calendar year 2023 reveals a noteworthy 18 percent increase, totaling 445,186, compared to the 378,390 registered in calendar year 2022. Despite this significant year-over-year rise, the total remains below the pre-pandemic figure of 757,816 recorded in CY2019.
Consumer filing figures for calendar year 2023 show a parallel increase, with a total of 419,559, marking an 18 percent rise from the 356,911 filings in the previous year. Within this category, consumer Chapter 13 bankruptcy filings reached 175,964, reflecting an 18 percent increase over 2022’s total of 149,069. Consumer Chapter 7 filings also rose by 17 percent in CY2023 to 242,936 from 207,188 in the previous year.
While still below pre-pandemic levels, overall bankruptcy filings across categories increased in the face of diminishing pandemic emergency responses, escalating interest rates, and stricter lending standards. As interest rates remain elevated and global tensions impact supply chains, both businesses and families are turning to bankruptcy as a proven process for a financial fresh start.
In December 2023 alone, total bankruptcy filings reached 34,447, marking a 16 percent increase from the December 2022 total of 29,654. The consumer bankruptcy filing total of 32,390 represented a 16 percent
I anticipate the trend to persist into 2024 due to factors such as the conclusion of pandemic stimulus, rising fund costs, increased interest rates, growing delinquency rates, and historically high levels of household debt.
Equipment and Software Investment: The third quarter saw a sluggish performance in Equipment and Software (E&S) investment, with a modest rise of 0.5% (annualized) following a robust 7.0% growth in Q2. The persistently elevated interest rates are anticipated to continue dampening investment throughout 2024, maintaining a relatively weak near-term investment climate.
Momentum Monitor: The latest Momentum Monitor assessment indicates that growth in equipment and software investment is likely to remain restrained across various equipment verticals in the coming two quarters. Despite this, recent improvements in readings for most verticals offer a degree of cautious optimism, suggesting potential for increased investment in the latter half of the year.
Manufacturing: After a lackluster year marked by stagnation in the manufacturing sector, U.S. manufacturers are expected to grapple with similar challenges in 2024. High interest rates continue to impede capital expenditure plans, and while the overall pace of U.S. economic growth is expected to moderate, global demand remains subdued. However, certain key industries, including semiconductors and green energy, may experience a boost from continued federal investments, positively impacting associated equipment verticals.
Small Businesses: Despite benefiting from robust consumer spending in the past two years, Main Street faces increasing pessimism among small business owners regarding near-term sales revenue. Concerns are rising that consumers may be showing signs of reducing spending.
Fed Policy: The Federal Reserve maintained interest rates at 5.25–5.50% in its recent meeting. With a significant decline in inflation over the last six months, if economic growth weakens in late 2023 and early 2024 as anticipated, there may be pressure on Fed officials to initiate rate cuts in the spring, particularly if inflation remains around the 3% mark.
U.S. Economy: The U.S. economy likely avoided a recession in 2023, displaying resilience in the labor market despite higher interest rates. The Federal Reserve’s successful efforts to control inflation without causing widespread job losses have instilled confidence in a “soft landing” scenario. However, caution is advised, as high government expenditures contributed significantly to GDP in 2023 but are expected to have a lesser impact in 2024. Consumer spending may soften amid rising financial stress, and global economic conditions remain fragile.
While a recession in the first half of 2024 remains a possibility, a soft landing appears to be the most likely scenario.
Economists on Wall Street are projecting a commencement of rate cuts in the second quarter of the upcoming year, anticipating a slowdown in growth and a decrease in inflation. This insight is derived from the latest survey conducted by the U.S. Securities Industry and Financial Markets Association (SIFMA), a biannual assessment of chief U.S. economists within the industry.
The survey reveals that a substantial majority (87%) of these economists believe that the U.S. Federal Reserve has concluded its series of interest rate hikes, with almost half (46.7%) expecting a rate cut in the second quarter. This prediction coincides with expectations of a significant deceleration in economic growth, with the median forecast for GDP growth in 2024 dropping to a mere 0.7%, contrasting sharply with earlier projections of 2.5% for the current year.
In tandem with the economic slowdown, projections indicate a rise in unemployment next year, coupled with a decrease in consumer inflation to 2.2%, down from 3.3% in the present year.
My take – The U.S. economy is poised to remain positive but lose significant momentum from the third quarter’s outsized rise, likely slowing to less than 2% in the fourth quarter and slowing further into 2024, with the risk of recession still very real at 55-60%.
However, it is more likely than not that the Federal Reserve will not respond as swiftly to cut rates as the market anticipates. The potential for an extended period of elevated rates, with rates possibly staying well above neutral beyond 2025, could instigate increased economic challenges.
In 2023, businesses face significant challenges, including rising interest rates and ongoing issues from 2022. To navigate these hurdles, companies must conduct comprehensive financial analyses and adjust their forecasts for 2023 and 2024. The shift from pandemic-related concerns in 2020 and 2021 to supply chain disruptions in 2022 has evolved into challenges related to excess inventory management, working capital, and the impact of rising interest rates in 2023.
Despite discussions about declining inflation, the August 2023 Consumer Price Index (CPI) and Producer Price Index (PPI) indicated otherwise, raising concerns about inflation, interest rates, and the possibility of a recession. This discrepancy is attributed to increased costs since 2020, exacerbated by government stimulus funds that temporarily masked underlying issues.
For instance, a $100 million company facing 20% cost increases without passing them on to customers may see an $18 million drop in operating income. The shift in interest rates from 0.04% in May 2020 to 5.3% in August 2023 also impacts companies with debt, potentially leading to significant EBITDA losses.
To address these challenges, businesses must meticulously assess their financial standing. The process begins with a thorough financial analysis, considering stimulus funds’ impact, pandemic-related costs, contract evaluations, cost assessments, automation opportunities, profitability analysis, and working capital management. Subsequently, forecasts for 2023 and 2024 should be adjusted based on the analysis, leading to a more informed performance risk analysis that identifies target performance levels and potential outcomes.
In sum, businesses must proactively analyze their financial positions and adapt their strategies to cope with the changing economic landscape and evolving challenges.
I am pleased to present the latest macro market report, offering insights into the prevailing economic conditions and their potential impact on our industry and wider financial landscape.
The U.S. economy has outperformed expectations, with an estimated annualized GDP growth of 2.0 to 2.4% in the year’s first half. While initial sluggishness in business sentiment and investment was observed, consumer spending, driving 65% of GDP, remained robust. A potential moderation in consumer spending in the latter half of the year could lead to slower growth, projected at 2% in the second half of 2023 and 0.5% in the first half of 2024.
The Federal Reserve’s tightening cycle, which raised rates by 525 basis points since March 2022 to a range of 5.25-5.5%, is anticipated to conclude soon, assuming inflation continues its downward trend. The Fed’s balance sheet reduction process is ongoing, extracting liquidity at a rate of around $100 billion per month.
Inflation has shown some improvement, although it has persisted more than anticipated. While falling energy prices have lowered headline inflation, core inflation metrics, excluding volatile energy and food costs, have seen limited progress, particularly in services categories. Gradual inflation improvement is foreseen, but achieving the Fed’s 2% target might extend until late 2024.
With a low 3.5% unemployment rate, labor markets remain tight, yet certain signs of balance are emerging. While job openings and payrolls remain above long-term averages, declining labor productivity, reduced temporary employment, and a lower quit rate indicate a more balanced labor supply and demand. Pressure on corporate profits might lead to reduced hiring. The unemployment rate is predicted to reach the upper 3% range by year-end and the low 4% range in 2024.
Consumer support from pandemic-related savings is waning, and spending growth, although resilient in the first half of the year, is moderating, particularly in services like travel and dining. Student loan repayments restarting could pose a minor headwind. Household financial health appears stable, with most debts secured at low fixed rates. Supply chain bottlenecks have largely eased, but specific commodity inputs and components are still recovering.
The housing market is stabilizing after a significant drop in activity in the latter part of 2022, with mortgage rates hovering around 7.25% range and elevated home values supported by low vacancy rates.
The resolution of the debt ceiling episode had minimal economic impacts, although Fitch downgraded the U.S. credit rating due to increased borrowing and recurring fiscal challenges. Regional banks are expected to experience slower loan growth, potentially affecting economic activity. Challenges in the commercial real estate sector could intensify as leases are renewed, and debt matures, particularly in urban office and retail properties.
Source: Bureau of Economic Analysis (attached) & Bureau of Labor Statistics
The Equipment Leasing & Finance Foundation’s monthly confidence index for May 2017 reveals interesting insights into the equipment finance market. Despite a slight dip in confidence, industry experts remain optimistic about the future. In this blog post, we’ll explore the key findings from the report and analyze the factors influencing market confidence and the potential impact on the economy. Let’s delve deeper into the survey responses and understand what the future holds for the equipment leasing and finance industry.
Confidence Levels in the Equipment Finance Market The May 2017 index shows a moderate decline in market confidence, with the confidence index falling from 65.8 in April to 63.2 in May. This slight decrease may be attributed to the uncertain political climate and changes to healthcare legislation, which could have influenced businesses’ cautious approach to capital expenditures.
Business Conditions and Demand Expectations When asked about their business conditions over the next four months, 22.6% of executives believe that conditions will improve. However, this percentage has decreased from 36.7% in April, indicating a growing sense of uncertainty among industry professionals.
Regarding the demand for leases and loans to fund capital expenditures, 39% of respondents expect an increase in demand over the next four months. This figure shows a slight decrease from 40% in April, suggesting a cautious sentiment among businesses regarding capital investment.
Access to Capital and Hiring Expectations The majority of respondents (83.9%) expect the same level of access to capital to fund their businesses, indicating relative stability in the financial environment. However, there is a slight decrease in those expecting more access to capital (12.9% in May compared to 16.7% in April).
On the employment front, 45.2% of executives expect to hire more employees over the next four months. While this is a positive sign, the percentage has risen only slightly from 40% in April.
Outlook on the U.S. Economy Despite the cautious approach seen in the equipment leasing and finance market, respondents remain optimistic about the U.S. economy. All respondents rated the U.S. economy as fair, with the majority expecting steady economic growth.
Approximately 42% of survey participants believe that U.S. economic conditions will improve over the next six months, a figure that has slightly decreased from 46.7% in April. Conversely, 6.5% of respondents expect economic conditions to worsen in the next six months, up from none in the previous month.
Factors Influencing Market Sentiment Several factors have contributed to the cautious sentiment in the equipment leasing and finance industry. The uncertain political climate and the delay in tax reform and healthcare policy have impacted investment decisions, leading businesses to adopt a more conservative approach to capital expenditures.
The changes to healthcare legislation have also created some uncertainty, potentially slowing down market growth. However, industry experts believe that the waiting game played by small businesses in the first quarter has ended, and demand is expected to flow more freely in the coming months.
The Equipment Leasing & Finance Foundation’s May 2017 confidence index may have experienced a slight decline, but the industry outlook remains cautiously optimistic. Despite concerns about the uncertain political climate and healthcare legislation, the equipment leasing and finance market is expected to stabilize.
As businesses navigate the ever-changing economic landscape, access to capital and hiring expectations remain relatively stable. By closely monitoring market developments and being proactive in decision-making, businesses can position themselves to seize opportunities and thrive in the equipment leasing and finance industry.
In the coming months, businesses should stay attuned to policy changes, economic indicators, and market trends. By doing so, they can adapt their strategies and make informed decisions that align with the evolving economic landscape.
Just like in baseball, sales can sometimes feel like a game of averages. Many salespeople dream of hitting it out of the park with their numbers, but instead, they find themselves stuck in mediocrity. They become the “Average Joes” of the sales world—steady performers, but never quite reaching the top. So, what can we learn from baseball to help us become all-star salespeople? Let’s take a lesson from a legendary baseball player, Babe Ruth, and see how his approach to the game can transform our sales performance.
Unleash Your Inner Babe Ruth
Babe Ruth was one of the greatest baseball players of all time, known for his powerful hitting and charismatic personality. But did you know that he also held the record for the most strikeouts? Babe Ruth understood that striking out was part of the game; it was a necessary risk to take if he wanted to hit home runs. In sales, we can adopt the same mentality.
Don’t be afraid of rejection or failure; they are inevitable in sales. Embrace them as stepping stones to success. Babe Ruth didn’t let strikeouts affect his confidence, and neither should you. Every “no” you hear is just one step closer to a “yes.”
Practice Makes Perfect
Babe Ruth didn’t become a home run king overnight. He practiced relentlessly, honing his skills and perfecting his swing. Similarly, sales success requires practice and continuous improvement.
Invest time in refining your sales techniques. Attend workshops, read books, and seek mentorship from top-performing salespeople. The more you practice and learn, the better equipped you’ll be to handle any pitch that comes your way.
Embrace the Team Spirit
Baseball is a team sport, and even the most exceptional players rely on their teammates for support. In sales, collaboration is equally important. Work closely with your colleagues, share insights, and learn from one another. A strong team can elevate everyone’s performance.
Avoid “Spectator Mode”
In baseball, some players get so focused on watching the game that they forget to play. In sales, this can happen when you spend too much time observing what other salespeople are doing instead of taking action yourself.
Don’t let “spectator mode” hold you back. Be proactive and take the initiative. Set challenging goals and take calculated risks to achieve them. Don’t wait for opportunities to come to you; go out and create them.
Focus on Your Swing (Sales Pitch)
Just like a baseball player’s swing is crucial for hitting a home run, your sales pitch is essential for closing deals. Craft a compelling and persuasive pitch that addresses your prospect’s pain points and demonstrates the value of your product or service.
Tailor your pitch to each prospect, and be ready to adjust it on the fly based on their responses. A well-executed pitch can be the difference between striking out and hitting a home run in sales.
Stay Resilient
In baseball, even the best hitters go through slumps. It’s all part of the game. Similarly, sales can be unpredictable, with ups and downs. The key is to stay resilient and bounce back from setbacks.
When faced with a challenging month or a lost deal, don’t dwell on the disappointment. Instead, analyze what went wrong, learn from it, and use that knowledge to improve your future performance.
Play the Long Game
Baseball games can be long, and players must maintain focus and endurance throughout. In sales, it’s essential to have a long-term perspective. Building strong relationships with prospects and customers takes time, and success may not come overnight.
Be patient and persistent. Keep nurturing leads, even if they don’t convert immediately. The effort you invest today may lead to significant wins in the future.
Wrap-Up
Just as Babe Ruth became a legend in baseball by embracing risk, practicing rigorously, and staying resilient, you can transform your sales game from average to all-star. Don’t fear rejection; swing for the fences, and remember that every “no” is one step closer to a “yes.” Continuously improve your skills and work together with your sales team to achieve greater success.
Focus on crafting a compelling sales pitch tailored to each prospect, and be prepared to adjust it as needed. Stay resilient, learn from your experiences, and maintain a long-term perspective. By adopting these principles from baseball and the legendary Babe Ruth, you can hit a home run in sales and become an all-star performer in no time.
In today’s dynamic business landscape, small businesses need to be agile and well-equipped to seize new opportunities. As the Equipment Leasing and Finance Association (ELFA) highlights, financing equipment can be a game-changer for these businesses, providing them with a range of benefits that help drive growth and success. In this blog post, we’ll explore the reasons why nearly eight in 10 U.S. businesses choose equipment finance during National Small Business Week. From 100% financing with no down payment to convenient bundling solutions, read on to discover how financing equipment can transform your business.
100% Financing with No Down Payment
One of the most significant advantages of equipment financing is the ability to secure 100% financing without a down payment. This means that you can acquire essential equipment and technology immediately without depleting your cash reserves. By preserving your capital, you gain the flexibility to invest in other critical areas such as business expansion, marketing, research, and development, which are essential for long-term success.
Cash Flow Management and Expense Planning Equipment leasing or financing allows you to spread expenses over time, matching your cash flow and business cycle fluctuations. Unlike large upfront capital expenditures, lease payments can be tailored to fit your budget, providing you with better control over your financial commitments. This predictability enables more effective financial planning, empowering you to allocate resources efficiently.
Risk Mitigation and Inflation Hedging Investing in capital-intensive equipment comes with inherent risks, especially when technology evolves rapidly. By opting for equipment financing, you shift the risk of ownership to the lessor. This way, you won’t have to bear the burden of owning outdated or obsolete equipment. Additionally, with deferred future payments, you can hedge against inflation, ensuring that your equipment retains its value over time.
Access to Better Equipment and Technology Equipment financing empowers you to access cutting-edge equipment and technology that might otherwise be financially out of reach. Upgrading to more advanced machinery enhances productivity, efficiency, and quality of output. Staying at the forefront of technology can also give you a competitive advantage, attracting more customers and helping your business thrive.
Expertise from Industry Professionals When you finance equipment, you benefit from the expertise of professionals who understand your industry’s unique requirements. Equipment finance providers have in-depth knowledge of the equipment you need and can offer tailored solutions that align with your business objectives. Their insights and guidance can help you make informed decisions and optimize your equipment usage.
Asset Management Simplified From the moment of delivery to disposal, equipment finance solutions often include asset management services, lifting the burden of maintenance and end-of-life concerns from your shoulders. This level of support allows you to focus on your core business activities while leaving the logistics and maintenance to the experts.
Convenience of Product and Service Bundling Equipment financing offers a comprehensive solution by bundling products and services into a single, easy-to-manage package. This simplifies your administrative processes and allows you to concentrate on your business operations. By dealing with a single provider, you can streamline communications and avoid the complexities of managing multiple vendors.
As small businesses strive for growth and success in a competitive landscape, equipping themselves with the right tools becomes paramount. Equipment financing emerges as a compelling solution, offering 100% financing, cash flow management, risk mitigation, access to top-notch equipment, and expert support, all while simplifying asset management and bundling services for added convenience. Embrace the benefits of equipment financing today and set your business on the path to prosperity.
The equipment leasing industry has experienced remarkable growth in recent years, with over $1 trillion dollars of equipment being leased annually in the U.S. As lease portfolios expand and become more complex, maintaining accurate data and records has become essential for equipment leasing companies. Data tracking not only ensures compliance with income, sales, and property tax regulations but also enables businesses to make informed decisions that drive success.
In this blog post, we’ll explore the importance of data tracking for equipment leasing companies and how to develop a sound data management system. By answering critical questions about asset tracking, documenting lease data, and utilizing data analytics, businesses can gain valuable insights and improve operational efficiency.
Understanding Data Tracking for Equipment Leasing Companies As the equipment leasing industry continues to flourish, the significance of data tracking becomes apparent. Proper asset tracking ensures accurate reporting for income taxes, sales taxes, and property taxes, making it an essential component of a successful leasing business. But what level of detail is necessary for data tracking?
Companies may differ in their approach, with some tracking every asset individually and others opting for a more consolidated approach. To determine the best policy, leasing companies should consider factors such as asset location, asset types, and the type of lease involved. Tracking assets separately based on these criteria provides valuable insights for analyzing performance and tax treatment.
Documenting Lease Asset Data Creating a standardized form or checklist for documenting lease asset data is crucial for maintaining accuracy and consistency. This form should include all relevant data to be input and tracked during the lease booking process. A fillable PDF or Word document can serve as a simple yet effective tool for this purpose.
It is advisable to have an independent review and approval process before finalizing the lease data. This additional step helps prevent potential errors and ensures that all necessary information is correctly captured. Errors at the initial booking stage can lead to significant complications later on, making the review process a valuable safeguard.
Moreover, companies may choose to use customer relationship management (CRM) software to record and manage this information more efficiently. Larger businesses that can invest in CRM systems can benefit from a streamlined approach to data tracking.
Data as an Operational Improvement Tool Beyond asset tracking data, equipment leasing companies can leverage additional data points to improve their operational decision-making. Information related to leases, such as sales representatives, sales offices, vendors, clients, and industries, can offer valuable insights when analyzed effectively.
By separately tracking this information and analyzing it, businesses can assess the performance of individual sales representatives and identify high-yielding industries. Thoughtful planning and analysis based on this data can lead to valuable improvements in various aspects of the company’s operations.
Utilizing Collected Data To harness the full potential of the data collected, equipment leasing companies have several options. Many lease portfolio management systems come equipped with built-in data analysis functionality, simplifying the process of reporting and analyzing data.
Companies may also combine CRM software with lease portfolio software to enhance data analysis capabilities. In some cases, businesses may even invest in custom data analytics software tailored to their specific needs.
However, even for smaller companies, tracking and analyzing data in Excel can provide valuable insights. Whether through specialized software or simple spreadsheets, data analysis can contribute significantly to an equipment leasing company’s growth and success.
In conclusion, data tracking is a fundamental aspect of running a successful equipment leasing company. By understanding the level of detail needed for asset tracking, documenting lease data meticulously, and utilizing collected data for analysis, businesses can optimize their performance, comply with tax regulations, and make informed decisions.
Embracing data-driven strategies empowers equipment leasing companies to stay ahead of the competition, improve operational efficiency, and achieve sustainable growth in this thriving industry. As technology continues to evolve, harnessing the power of data will become even more critical for companies aiming to succeed in the dynamic world of equipment leasing.
