Download the NEFA Newsline Jan/Feb issue here, and be sure to visit the NEFA website.
2024 Executive Outlook
The equipment finance sector encountered a multitude of challenges throughout the course of 2023. The sector grappled with the swift ascent of interest rates, stubborn levels of inflation and the looming specter of a potential recession—issues that continue to exert their influence on the economic fabric. As we begin a new year, Newsline engaged in insightful conversations with four executives from the equipment finance industry who provided their perspectives on the industry’s performance in 2023 and offered their projections for the trajectory of the industry in 2024.
Newsline: How would you describe new business origination activity in 2023? Did overall new business activity and activity in any equipment sector surprise you in any way?
Todd Wainwright: Originations were solid and steady in the first half of the year and culminated with record activity in the second half of 2023. Amur funded nearly 3,000 small businesses in Q4 alone, a testament to the strength of the relationships with our national network of partners. The increase in demand was expected for a couple of reasons: 1) the higher interest rate environment is likely here for a while and small businesses cannot continue to hold off on essential equipment acquisitions and 2) we have seen other lenders tighten up in this economic environment, further emphasizing the resilience of our relationships.
We expected the year to be “back-ended”, given the rate cycle. We also expected to see strong origination growth in construction and manufacturing, which have strong tailwinds from infrastructure investments occurring nationwide and continued supply chain re-shoring post-pandemic. As a result, we have not been terribly surprised by the origination patterns we’ve seen this year. That being said, the scale and impact of the regional bank turmoil that we saw at the end of Q1 and into Q2 was certainly a surprise. Since then, we have seen several regional banks pull back in terms of lending and overall vendor support. This has created a very real opportunity for well-capitalized independents to gain market share and we have certainly seen a strong uptick in new and strengthened vendor partners since then.
Newsline: As we enter the new year, many (not all) economists are predicting a mild recession or a “soft landing” as well as the possibility of interest rate cuts. How will equipment financing demand likely be impacted by interest rate changes?
Wainwright: A “soft landing” appears to be more and more likely. The Federal Reserve has signaled the end of rate hikes and likely rate reductions. We’re bullish for the first half of 2024 – we expect the trends we saw in Q4 2023 to continue through 2024 with small businesses still needing to satisfy the demand for replacement or additional equipment that had been building. As always, strong cash management is essential to the success of a small business. Even in a higher interest rate environment (and maybe more so), equipment financing will continue to be one of the strongest tools for cash management.
Newsline: Did your company experience an increase in delinquency in any specific sectors in 2023? Are you expecting delinquency to continue to rise or level off in 2024?
Wainwright: We entered the year on the heels of two years of record performance, which we knew would be impossible to sustain. And while we did see some mean regression. Construction and manufacturing continued to perform very well given industry tailwinds. We did see an uptick in delinquency in transportation, but this is a sector we’ve been in for a long time, so we know its cyclicality and are prepared for it. We expect performance to improve in 2024 as rates recede.
Newsline: As you look ahead to 2024, what are the top priorities for you and your management teams in 2024 (e.g., expanding staff in specific areas, investment in technology, focusing on portfolio health, addressing credit underwriting criteria)?
Wainwright: We see 2024 as an opportunity to bring in new partnerships and strengthen current ones as our competitors are pulling back. As always, our goal is to work with our partners to support the growth of small businesses and provide a premier experience for our partner community. Continuous improvement is of core importance, so we have many exciting plans to enhance partner experience in 2024. I know our IT team is hard at work to roll out a number of exciting enhancements that will not only meet but exceed the evolving partner needs. Simply put, our efforts are focused on doing everything we can to make business easier and faster for our partners, while of course, maintaining the appropriate risk mitigation.
Newsline: How would you describe the hiring environment over the past year? In which functional areas (if any) will you likely be hiring in 2024?
Wainwright: Amur has a deep commitment to our people as they are the driving force of our success. We are proud of our talented team and the collaborative workplace we have created. We are fortunate to have been recently recognized as a Great Place to Work for the sixth consecutive year, supported by an amazing human resources team that puts a tremendous amount of effort into both our overall company culture and strong employee retention. Overall, we are positioned well for the continuing business growth we expect in 2024. We plan to continue to hire to support each department’s needs as we reinforce our position as a leader in the equipment finance industry. With that said, for the right person – we are always hiring.
