Business owners turned to commercial lenders and increased their investment in equipment last month, reflecting renewed confidence in economic prospects, according to a report released this week by the Equipment Leasing and Finance Association.
ELFA's Monthly Leasing and Finance Index shows overall new business volume climbed to $5.1 billion last month, up 21 percent from the same period in 2011. Volume was down 53 percent from December, but analysts were quick to point out that a lull in equipment financing is typical for the beginning of the year.
Equipment financing tends to serve as a barometer for wider market sentiment, as it reflects business owners' feelings about incurring debt, expanding their operations and hiring new workers.
ELFA also reported gains in credit quality metrics, with charge-offs falling to 0.5 percent in January, down from 0.7 percent the month before. Meanwhile, credit approvals fell to a more typical level of 77 percent, while roughly 71 percent of surveyed organizations claimed they submitted more transactions for approval in January, down from 77 percent in December.
"January's increase in new business volume returned to a more typical growth pattern following a very busy end-of-year for many leasing and finance companies," said ELFA president and CEO William Sutton.
"The continued strengthening in financing volume and trend toward healthier portfolios provide clear evidence that the equipment finance marketplace is in the midst of regaining some of the momentum lost during the Great Recession," Sutton added.
While equipment financing has shown signs of improvement in recent months, overall lending to business has been slow to recover from the recession. Lenders maintain demand is minimal, but borrowers hold that banks' tighter credit standards have made traditional small business financing a difficult task. Consequently, many firms have sought out alternative lenders and credit networks.