In December, ELFA had the opportunity to meet with Federal Reserve officials and present on the equipment finance industry’s role in supporting the rapidly growing artificial intelligence economy, with a particular focus on financing AI data center infrastructure. ELFA CEO Leigh Lytle led the presentation alongside Kelli Nienaber, Executive Director of the Equipment Leasing & Finance Foundation, Ethan Heilig, ELFA Director of Strategic Initiatives, and me in my role as Director of Federal Government Relations. Together, we highlighted how equipment finance enables investment in the physical backbone of AI innovation.
As AI adoption accelerates, demand for data centers has surged, requiring substantial investment in specialized equipment such as servers, cooling systems, power infrastructure, and advanced networking technology. We emphasized that equipment finance plays a critical role in facilitating these investments by providing flexible, asset-based financing that allows businesses to deploy cutting-edge technology while managing capital constraints and rapid innovation cycles.
The discussion also explored the unique risk and valuation considerations associated with AI-related equipment. Our team described how resale value is a central component of underwriting in equipment finance, particularly for technology assets with shorter useful lives. Federal Reserve staff expressed interest in how lenders account for technological obsolescence, prepayment risk driven by rapid equipment refresh cycles, and the implications these factors have for portfolio performance.
In addition, we addressed the role of secondary markets and the securitization of equipment receivables, including equipment asset-backed securities (ABS). The conversation highlighted how secondary trading of equipment ABS contributes to liquidity, risk distribution, and capital efficiency across the financial system. Understanding these dynamics is increasingly important as AI-related financing volumes grow and investor interest in technology-backed assets expands.
We also underscored that the industry’s support extends beyond large, hyperscale data center operators. Equipment finance enables the broader digital infrastructure throughout the country, especially for manufacturers, contractors, and a wide range of businesses to participate in the AI ecosystem, helping to provide access to advanced technology across the economy.
The meeting reinforced the value of ongoing dialogue between the equipment finance industry and policymakers. As AI continues to reshape economic activity, ELFA’s engagement with the Federal Reserve helps ensure that policy discussions reflect and incorporate the vital role equipment finance plays in supporting sustainable economic growth.
