Heading into 2026, industry experts see the equipment finance industry building on the successes of 2025, but mix optimism with some concerns and cautions. Looking at key factors influencing the industry, four experts provide a look back on last year and a perspective on the state of funding for the year ahead.
2025 Retrospective
Stabilization, growth and uncertainty combined to make 2025 a dynamic year for the equipment financing industry.
“The year was one of stabilization in many ways,” says Kurt Nickels, Senior Vice President – Capital Markets/Equipment & Renewable Energy Finance at Fifth Third Bank. Bank balance sheets stabilized as focus on deposits eased from the peaks seen in 2024, following the previous year’s regional bank stress. As banks returned to growing balance sheets through new originations of loans and leases, pricing discipline among bank investors remained relatively tight.
Private credit expanded in the equipment financing market and ABS (asset-backed securities) markets reopened strongly, creating a competing source of market liquidity. Jeffry Elliott, Founder and CEO of Elevex Capital, agrees, noting that, in general, “people found homes for the right transactions.”
“The winners in the captives and independents space will have diversified funding sources (banks, private equity), strong access to the securitization market, vendor channel strength, servicing scale, and disciplined residual modeling for operating lease structures.”
—Kurt Nickels, Fifth Third Bank
Federal Reserve and administration actions took center stage in shaping 2025. Nickels views the Fed’s gradual lowering of rates as a net positive for the equipment finance industry. “Putting other administrative policies to the side, quantitative easing in rates creates tailwinds for any corporates that are on the sidelines about purchasing capex, and that’s some of what we experienced,” he states. He adds that the One Big Beautiful Bill enacted in the middle of the year included 100% bonus depreciation expensing, also creating tailwinds for new capex acquisitions or secondary market trades.
The presidential administration that took office early in the year opened up the market to a host of uncertainties on the regulatory side, according to Bob Johnson, Vice President of Capital Markets at Summit Funding Group. The announcement of broad-based tariffs affected how companies thought about purchasing and financing new equipment in opposing ways. “In the first half of the year, we actually saw an increase in orders and fundings,” he comments, explaining that companies with plans to purchase equipment for growth or maintenance pulled their orders up to safe harbor equipment before the implementation of the tariffs. But after tariffs went into effect, amid the ensuing confusion, companies that could afford to wait for more certainty ended up cancelling or delaying orders.
2026: What to Expect in Equipment Finance
Experts share a generally positive outlook for the industry in 2026 – with some trepidations. “It’s a mixed bag,” says Elliott. “We’re in a challenging environment that’s totally unique.”
K-shaped Economy Impacts
Elliott expresses concern about the overall economy’s effects on the industry. “There are a lot of good feelings about AI and the data center explosion, but when we look at everything else, things are not doing so well.” He speaks to challenges – with labor, tariffs, supply chain, inflation and more – “that you can’t fix quickly.” He expects to see more credit failures and struggling industries until a more level economy emerges.
“When we look at the K-shaped graph, we have to realize that the 80% who are struggling are those who must buy the goods our customers in this industry are making,” he says. “If they can’t buy those goods, everything will slow down.” Challenges may be on the horizon for the 20% as well. “They just haven’t been hit yet.”
Banking Industry Evolution
Changes in the banking industry will have a profound impact on the equipment finance market. Mergers are likely to continue, says Elliott, leading some banks to exit or reduce their presence in the equipment finance marketplace. Loan-to-deposit issues will increase as consumers take advantage of choices they have beyond banks and deposits shrink further.
“Banks will still be active, but will be more capital markets-focused and less originations-focused. As a result, we’ll see more captives and independents doing the originations, and banks buying them.”
—Jeffry Elliott, Elevex Capital
With less capital available to invest and buy transactions, the syndication market will shrink as a result. New entrants – independents and private credit – will continue to enter the market with capital and funding, but at higher yields than what is traditional for banks. The result is, and will be, very strong activity in the securitization markets.
Roo Rosenkrantz, Vice President/Leasing with Republic Bank of Chicago, comments on increased competition for assets and increased capital inflows in both the bank space and private credit space. “There’s more demand out than there is supply.”
Key Growth Areas
Nickels envisions that the easing of rates seen to date, and current depreciation expensing, will encourage large-ticket equipment finance opportunities in four key areas:
- Increased onshoring of manufacturing
- Continued energy transition investments as energy demand outpaces supply
- Capex for AI and large data center infrastructure
- Corporate aviation fleet upgrades
The market for energy remains strong from Nickels’ viewpoint. “The demand for energy is clearly outpacing supply, and as AI infrastructure and data centers continue to pop up, that demand will accelerate.” Even if tax credits are extinct in the next few years, he is optimistic that the industry can remain successful. “We will continue seeing merger-and-acquisition (M&A) consolidation among the large and small developers in this space.”
When it comes to renewable energy, Elliott expects transactions to decrease because of challenges resulting from administration and regulatory actions. While this may affect the equipment finance industry only tangentially, “it’s a market in flux.”
Capital and Secondary Markets
Demand and competition are the keywords for these markets in 2026. An uptick of capex financing demand, notably for large-ticket opportunities, should create a robust year for the equipment finance secondary marketplace (both buy and sell), says Nickels, as banks and independents will be looking to sell product to manage credit capacity thresholds.
Rosenkrantz also expects the secondary market for buyers to remain competitive, given the focus on growth. He is thinking that M&A activity could provide a boost for syndication teams, offering new credits and new sales rep opportunities for those teams. In addition, a post-M&A entity may offer higher, yet comfortable, credit exposures and the opportunity for syndication teams to sell more out of portfolio.
“Captives and independents are up against a very hungry and competitive bank market.”
—Roo Rosenkrantz, Republic Bank of Chicago
“We’re seeing too many dollars chasing too few deals,” says Johnson. “Now that yields on equipment finance as an asset class have normalized to historical levels, we’re seeing increased investor appetite manifested across the credit spectrum.” New entrants will continue to enter the large-ticket independent lessor space, with strong focus on structuring. He expects regional banks that have been quieter in recent years to become more active with increased buy targets. “And phenomena that will be a carryover from recent years are new joint ventures and partnerships targeting the mid-market space in between where banks and independents have traditionally played.”
Elliott agrees on the shift from banking. “I think there will be a lot of trading, but the trading partners will be a bit different,” he says, involving more independents, private credit and insurance firms. “Banks will still be active, but will be more capital markets-focused and less originations-focused,” he continues. “As a result, we’ll see more captives and independents doing the originations, and banks buying them.”
Captives and Independents
Given the changes in the secondary market and with other forces, Elliott believes that 2026 will be a year of “growth stories” for captives and independents. As banks shrink, merge, consolidate and reduce interest in speculative-grade deals, he says, independents – and captives, to a certain degree – will fill the void.
“The winners in this space will have diversified funding sources (banks, private equity), strong access to the securitization market, vendor channel strength, servicing scale, and disciplined residual modeling for operating lease structures,” states Nickels.
Continued bank health will be critical, he continues, since independents rely on funding from bank revolvers, warehouse lines, forward flow buyers and ABS markets. If bank liquidity tightens, he sees investment demand from independents shrinking. If it loosens, demand will grow.
Johnson concurs, noting that as banks have reasserted themselves into the equipment finance space over the past two years, they are investing directly in portfolios of equipment finance companies and providing lender finance to independents.
Nickels believes captives are headed for a strong year, and should gain market share on the heels of three factors:
- OEM sales incentives with required financing
- Higher market rates that are making leasing more attractive than buying
- OEM ability to strategically subsidize financing costs
Rosenkrantz offers a word of caution in that both captives and independents are “up against a very hungry and competitive bank market,” which may affect pricing and structure discipline. To maintain market position, he asserts, they will need to leverage their ability to be nimble and responsive. “It will be important to nurture the relationships they built over the past few years so they are not lured back to former bank partners offering competitive pricing.”
Credit Standards
Market focus across the board is volume, asset growth and profitability. “Goals are lofty,” says Rosenkrantz, but not at the expense of credit standards. “You never want to pursue anything outside of what you’re comfortable with, but there could be some subconscious pressures that accompany aggressive growth objectives,” he states. “Credit teams will need to remain vigilant.”
Johnson echoes the sentiment. “Especially in this competitive environment, it is important to remain diligent in evaluation of companies, and in understanding the macro drivers that impact the industries that those companies support,” he explains. “It is that diligence that allows a lender to build a portfolio able to withstand down markets.”
“We’re seeing too many dollars chasing too few deals. Now that yields on equipment finance as an asset class have normalized to historical levels, we’re seeing increased investor appetite manifested across the credit spectrum.”
—Bob Johnson, Summit Funding Group
Nickels expects banks’ credit standards will likely remain tight throughout the year. Facing a wave of bank consolidations, he says that both buy-side and sell-side management teams will be focused on maintaining top-performing balance sheets and profitability – and credit standards will play a significant role.
Elliott sees standards tightening slightly, especially on structuring and third-party capital markets transactions. “Performance was so good for so long, with no losses and very low delinquencies,” he says. “You may be able to loosen a bit with those conditions, but now that we’ve seen some losses – even if limited – it wouldn’t be surprising to see some tightening.”
Markets of Concern
Industry sectors that rely on discretionary consumer spending are, not surprisingly, often mentioned. These include hospitality, and discretionary construction and remodeling. And while services are doing very well, they must deal with the considerable challenge of finding and retaining labor.
Trucking
Trucking is a perennial concern. For Nickels, it’s small trucking fleets and last-mile logistic operators. For Elliott, it’s over-the-road brokerage freight trucking.
Both, however, see some silver linings ahead. While replacement cycles will dominate volume, Rosenkrantz sees a gradual transition out of a “freight recession,” with a much stronger year ahead. Elliott sees technology – including eventual transition to driverless vehicles – as a major opportunity for the trucking industry. “Driverless technology can help ease the industry’s hiring and labor issues, speed deliveries and reduce casualties,” he says.
Other Transportation
Consensus is that corporate aircraft is picking up. Marine has had some challenges over the past few years, but selective segments have the opportunity to do well going forward. Elliott cautions that climate and agriculture will have significant impacts.
Elliott expects that rail, which has been fairly stable, will improve if the economy improves, taking more from the trucking sector.
Data Centers
Elliott is also keeping an eye on data centers. “We have a bubble,” he states. “Some of it is very speculative, and I think it will pop.” Nickels and Elliott are observing software companies, with some being disintermediated by AI, and keeping a watchful eye on what other industries AI will change.
Interest Rate Outlook
Questions, concerns and predictions about Fed actions are top of mind. The only certainty is that no one knows what will happen.
Nickels expects rates will stay stable in 2026, with a possible 25 basis-point reduction. From Rosenkrantz’s perspective, there are even hints of the Fed raising rates, which could cause teams to quickly pivot on the strategies set at the start of the year.
“The Fed is in a challenging position as it continues to manage its dual mandate,” says Johnson. While inflation (measured by the Personal Consumption Expenditures, or PCE, price index) has cooled to 2.9%, he notes that it is still well above the Fed’s 2% target. “That ‘last mile’ of inflation is the stickiest, because it includes services inflation (housing, healthcare, insurance), which adjusts more slowly than other areas.”
Johnson thinks two quarter-point rate cuts may be ahead to edge closer to the Fed’s 3.00% target rate, with the reductions offset by a likely steepening of the yield curve. “I believe we may see a slight decrease in the three-year Secured Overnight Financing Rate (SOFR) swap rate, but overall, I think rates will be relatively flat.”
Conclusion
Economic conditions, changes in the banking industry, technology and the regulatory environment are among the forces working together to shape the equipment finance industry in 2026. “There are positives and negatives, with both challenges and opportunities,” concludes Elliott.
