The United States bull market turned nine at the end of 2017. In what was described as a “better than average” year, the U.S. economy now begins 2018 with growing GDP and optimistic sentiments behind it. Given this strength, business owners should remain vigilant in catching the wave, and consider equipment financing as an efficient way to finance further growth in the midst of interest rate change and new tax law.
CONFIDENCE IS NO LONGER A MISSING INGREDIENT
From market growth, to successful bank stress tests in 2017, many financial firms, dealers, and market pundits can agree that optimism has risen, and consumers are feeling more confident heading into 2018. The Equipment Leasing & Finance Foundation anticipates 2.7% GDP growth in 2018, up from 2.3% in 2017. Newly passed tax reform also has the potential to boost economic activity and corporate earnings overall. See our analysis of how President Trump’s Tax Reform can affect equipment finance.
The rise in confidence means many businesses are now more willing to take advantage of very favorable rates to finance capital. Most equipment is sold through lease agreements, so broad confidence can boost capital expenditures and thus create equipment financing opportunities.
NO CAP ON CAPEX
Equipment and software investment is projected to surge 9.1% in 2018, a big jump from 2017. This key trend indicates that small businesses have continued room for growth, even this late in the business cycle. Also, oil prices are expected to stabilize slightly this year, with forecasts ranging from $56-$60, which can encourage the energy sector’s continued growth and capital investment.
In fact, capital investments are forecasted to rise across the board for U.S. firms. From agriculture to aircraft, mining to medical equipment, annual growth forecasts are in positive territory. Your business can benefit from the rising tide in capital investments, by utilizing the right process in your equipment financing and acquisition process.
FINANCING IF THE FED RAISES RATES
The Federal Reserve has penciled in 2-3 three interest rate changes for 2018. The current ‘normalizing’ trajectory by the Fed can mean slight changes to the financing landscape. We think the effect will mostly be felt by businesses seeking commercial or industrial loans, but a season of interest rate change still provides opportunity to take advantage of equipment leasing and alternative financing. Competitive pricing will still prevail, and commercial and industrial lenders are at a disadvantage.
Interest rate increases may encourage small business owners to take a closer look at their lease bundles, and become more educated about their agreements, but the impact on equipment finance as a whole should be minor.
Business owners can combine market optimism, economic growth, and alternative equipment finance. With the overall lending environment still appealing, and with economic growth likely, now may be a good time to evaluate your current equipment lifecycle. Does any of your equipment need refinancing? Or a different lease type altogether?
Be ready for more economic growth, and don’t get left behind.
For more information contact us at 844. 816. 9420