ECA member Blue Bridge Financial has prepared an industry economic analysis that includes a forecast into what may lie ahead for the construction market.
Their projection starts off proposing that as historically smaller metro areas continue to grow and develop throughout the country, and the government continues to invest in infrastructure, we will continue to see demand for construction equipment across the country.
Currently, financing equipment in construction related industries makes up roughly 30% of the company’s portfolio and is one of their better performing sectors with minimal delinquencies and slow pays. They remain confident, offering some of their best interest rates for hard assets in the industry. As their vendor direct sales team continues to evolve and expand, they plan on aggressively pursuing partnerships with dealers, distributors, and manufacturers.
While current loan demand remains strong, they are keeping a close eye on the economic factors currently impacting the industry. While some of these factors will have a negative impact, others could provide additional opportunity as past phases of economic uncertainty have shown.
The impact of COVID weighed heavily for much of 2020. Many lenders, including Blue Bridge, faced unprecedented levels of deferral requests. Fortunately, borrowers rebounded quickly and the long term impact of deferrals was relatively minor. As COVID concerns fade, the equipment finance industry and the country at large, face a number of economic issues including rising interest rates, extended lead times on new equipment, macro inflation in areas including fuel prices, inflated prices for used equipment, and atypical hesitance from customers to follow through with purchases.
Demand Expected to Continue in 2023
Blue Bridge is still expecting continued demand for financing through 2023. Interestingly, during past phases of economic volatility, independent lenders have been able to capitalize on various opportunities. Typically, national and regional banks will pull back abruptly, leaving a large market of strong borrowers with fewer financing options thus, enabling independent lenders like Blue Bridge to fill the void beyond traditional borrowers.
Through mass information sharing with broker partners, vendor partners, customers, and other sources, Blue Bridge has developed industry knowledge positioning them to make changes quickly in response to some of these challenges.
Additionally, Blue Bridge is actively monitoring upcoming rate disclosure legislation that could significantly affect the industry. Starting in December of 2022, California will be enforcing a law requiring all fees associated with a loan; including documentation fees, titling fees, and, more importantly broker commission, be disclosed to the customer. The effect this will have on brokers is, as yet, unknown. But, Blue Bridge is actively educating their broker partners about these changes to ensure a smooth transition to these new practices. As a direct lender the company views the changing legislation as a positive step for the industry with greater transparency.
For more information about Blue Bridge Financial’s services reach out to representatives to ECA, Nick Dervenis [email protected], and Philip Kim at (703) 502-7587 or visit https://bluebridgefinancial.com