Business Borrowing for Equipment Rose 14% in August
Oct 4th, 2018 @ 8:50 PM by Amber Nelson
U.S. companies borrowed more for capital investments in August from the year before, according to the Equipment Leasing and Finance Association (ELFA), a continued sign that business confidence in the economy continues to grow.
Businesses financed $8.9 billion in new equipment loans, leases and lines of credit in August, up 14% from a year ago, when new business volume totaled $7.8 billion. Equipment loan borrowing also rose 9% on a monthly basis from $8.2 billion in July.
“Fundamentals in the U.S. economy are favorable for capex investment by both large and small borrowers…,” ELFA Chief Executive Officer Ralph Petta. “Steadily rising interest rates, a spate of disagreements with our trading partners and a powerful hurricane have seemingly little, to no, effect on the U.S. economy and its continued vitality.”
ELFA’s data comes from its leasing and finance index, a measure of commercial equipment loan volume. ELFA surveys 25 companies including Verizon Communications Inc, Bank of America Corp, Canon Inc, the financing units of Caterpillar Inc, Deere $ Co, Siemens AG, BB&T, and CIT Group Inc. These participants are representative of the equipment finance sector’s $1 trillion market.
Credit approvals also ticked up in August for business equipment borrowing, growing to 76.4%, up from 76.2% in July. That increase indicates that lenders are slightly loosening their credit standards for business loans.
ELFA also found that receivables over 30 days made up 1.9% of all loans in August, unchanged from July and up from 1.5% a year earlier.
In a related note, ELFA’s non-profit affiliate the Equipment Leasing & Finance Foundation reported that business confidence in the economy is up, with its confidence index climbing to 65.5 in September, up from 60.7 in August. Readings above 50 denote that businesses have a positive outlook on the economy.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.