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ELFA Credit Manager Survey Asks: What Keeps You Up at Night?

June 29, 2017, 07:18 AM

What’s the state of credit and collections in the equipment finance industry? The 7th Annual Credit Manager Survey provides some key insights. The survey results, based on feedback from close to 300 ELFA members, were presented at ELFA’s 2017 Credit and Collections Management Conference, June 4-6 in Baltimore. The 2017 survey covered a variety of topics including: credit metrics at bank, captive and independent leasing companies; collateral and residual valuations; credit processes; regulation; and the macroeconomic environment.

Top Takeaways
Highlights from the 7th Annual Credit Manager Survey include:

Steady as she goes, consistent with 2016-2017 surveys results. We are in good times but…

Growth is up and more growth is anticipated

  • 41% overall expect to increase staff -- highest share in four years
  • 45% of10% 
  • 88% of all respondents expect an increase in 2017 
  • Only 56% of captives expect increase

Pressure from sales similar to last year

Overall view is to maintain current standards regardless of lender type

  • 68% view credit quality as similar to last year overall, with banks at 72%

Efficiency is not improving as much as desired

  • Slightly fewer think there is an overreliance on scores
  • Automated thresholds slightly higher 
  • Only slight increase in % decisioned under 3 days 
  • Fewer have the highest approval rates (>80%) 
  • Far fewer have highest conversion rates (>60%)

Regulatory and compliance expectations require perfection, making efficiency gains difficult

Increase in requests from clients to modify credit or documentation requirements

  • Financing of higher percentage of intangibles
  • Longer financing terms 
  • Waiver of guarantees 
  • Waiver in change of control
  • Waiver of cross defaults 
  • Softer notice and return provisions

Stable PD’s but watch out for LGD’s
Lessors are pulling away and reducing exposure in:

  • Metals and Mining
  • Retail 
  • Some Agriculture 
  • Transportation

Have we already forgot the lessons learned of the not-so-distant past?

As credit managers comb through their portfolios, policies, processes and new approvals the question most asked is: “What are we missing?”

What Keeps You Up at Night?

It is truly the question on the survey “What Keeps You Up at Night?” that is the most telling. In linking this survey question to the countless discussions on this question at the Credit and Collections Management Conference, it is the last takeaway above—“What are we missing?”—that is most unsettling to credit professionals within the equipment finance industry. Are we really getting ready for the unexpected events and the inevitable downturn in the credit cycle and are we managing our portfolios accordingly? Only time will tell.

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