In October, U.S. companies borrowed 8% less to finance equipment investments compared to the same period last year, according to the Equipment Leasing and Finance Association (ELFA). The ELFA, which reports on economic activity in the nearly $1-trillion equipment finance sector and surveys banks like Bank of America and financing affiliates of equipment makers like Caterpillar, Dell Technologies, Siemens AG, Canon Inc., and Volvo AB, said that some businesses felt the impact of high interest rates.
Despite a strong U.S. economy with solid metrics, ELFA CEO Ralph Petta reported slight increases in both losses and delinquencies among participants. This softness in credit quality can be attributed to challenges experienced by some businesses as they operate in a higher interest rate environment, constrained by reports of a pull-back in bank lending at least in some sectors.
The trends are consistent with the economic environment and market turmoil resulting from quantitative tightening, inflation, employment disruption, and supply chain disruption. 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 to 76%, up from 73.6% in September.
The Equipment Leasing & Finance Foundation (ELFF), ELFA’s non-profit affiliate organization, reported that its confidence index stood at 42.8 in November compared to 40.1 in October – an increase indicating a positive business outlook with readings above 50 indicating optimism about future business conditions.
Reporting by Aatreyee Dasgupta in Bengaluru; Editing by Tasim Zahid