Joe Lanni Explains How the Equipment Financing Industry has been Impacted by COVID-19
Industries across all sectors have been impacted by COVID-19, the equipment financing industry being no exception. The equipment leasing and financing industry is undeniably going through some harder times; however, research indicates that things are slowly turning around.
The Equipment Leasing & Financing Foundation has been closely monitoring the situation since the beginning and has been releasing a monthly report on how the industry has been impacted by COVID-19. This information is collected via a voluntary survey filled out by key executives from the $900 billion equipment finance industry.
Joe Lanni currently works as an equipment financing consultant in Toronto, Ontario. In the last few months, he has been called on to provide advice/consulting by start-ups and investors to give his opinion on certain industries and companies. Now, Lanni has decided to transition his career to become an equipment financing agent/consultant full-time. Joe Lanni shares the main ways that the equipment financing and leasing industry has been affected by COVID-19.
Loss of Demand for Leases and Loans
The first and most obvious way that the equipment financing industry has been impacted is through the significant decline in demand for equipment leases and loans. According to Joe Lanni, this has been the most devastating impact of the virus on this specific industry. Businesses that previously would have used equipment leasing simply do not have the capital to do so right now. In addition, some businesses, even larger ones, are concerned about the future, as no one knows how long COVID-19 will last. The result is a major drop in the demand for equipment leases and loans, which has thrown the industry for a loop. When surveyed in May 2020, 86.7% of respondents believed that demand would continue to decline moving forward. While this may sound disheartening, This is actually a decrease in the percentage of executives who felt this way compared to when they were surveyed in April.
Loss of Capital
Directly relating to the loss of consumer demand for leases and loans, Joe Lanni claims that there has also been a serious decline in the amount of available capital held by equipment financing and leasing companies. This indicates that many equipment financing companies have been and will continue to be unable to fund new equipment acquisitions. This is essential to the functioning of the industry. However, right now, holding off on acquiring new equipment is necessary given the low demand.
Again, industries across all sectors have had to permanently lay off or furlough workers. In this regard, the equipment financing and leasing industry has fared relatively well. A whopping 88% of companies have stated that they have not furloughed or laid off any workers due to COVID-19. Even better, the latest research suggests that some companies are ready to hire new employees. In May, 16.7% of executives reported that they expect to hire more employees in the coming months. This was an increase of nearly 10% from the month of April. In addition, the percentage of executives who expected to hire fewer employees moving forward decreased.
Joe Lanni on Payment Deferrals
Lastly, another way the equipment financing industry has been affected by the global pandemic is through payment deferrals. Equipment finance companies have been offering more payment deferrals than ever before. This is a necessary step, given that many of the businesses leasing the equipment are in financial ruin and have simply been unable to make their payments since the pandemic began.
In fact, the Equipment Leasing & Financing Foundation report found that 92% of equipment financing companies have offered payment deferrals to clients in the wake of COVID-19. In addition, 82% of equipment financing companies expect the default rate to be greater in 2020 than it was in 2019. While these statistics might sound troubling, Joe Lanni claims that aiding in the recovery of clients by offering payment relief plans is a necessary short-term goal. In the medium and long-term, Lanni advises equipment financing companies to stay firm on term, structures, and marketable pricing so that industry credit remains and financial problems are mitigated.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes