The following is excerpted from the July/August/September 2017 issue of ELFA's Equipment Leasing & Finance magazine:



Download the Fed Data PowerPoint.

Recent data from the Federal Reserve validate what leasing professionals have understood about their industry for years. The data reach back to the first quarter of 1985 and underscore the fact that, when it comes to delinquencies and charge-offs, equipment leasing remains one of the best performing sectors under the broader umbrella of commercial finance.

Bob Rinaldi, Chief Executive Officer of Commercial Industrial Finance, Inc., shared his views on the data. For Rinaldi and any equipment finance professionals with 10 years of industry experience under their belts, the most recent data on charge-offs and delinquencies offer no surprises. Rinaldi states simply, “There’s nothing in this data that should alarm anyone in the industry…the data points are exactly where they should be. Everything here just makes common sense.”

The stability of leasing assets hangs on three attributes: the fact that lessors deal with essential use equipment, the value of the collateral and the short maturities with payment schedules that amortize to zero with no option to charge back up as is the case with lines of credit.

While the facts speak for themselves, Rinaldi says the Federal Reserve data serve to debunk the misguided assumption that leasing is a riskier product offered by the commercial finance segment. He explains, “For those bankers the leasing story is hard for them to believe until you tell them that the data is compiled by the Federal Reserve.”

“As far as where we are to date, if you look at the MLFI-25—and you’ll note that delinquencies have picked up a bit—but in the big picture, those increases are at historic lows, and delinquencies and losses are lower than I can remember them being in the last 20 years or so.”

Going forward, Rinaldi sees things holding steady for the leasing industry as a whole. Like his colleagues, Rinaldi is optimistic but tempers this optimism until he sees some tangible results on the regulatory front. “Sure I’m more optimistic, but all the optimism in the world doesn’t change what we’re seeing in the present. I don’t see businesses throwing gas on the fire for growth…I think they’re still extraordinarily cautious with their capital spending.”