Originally appeared in Monitor Daily

Just when things seemed to be turning in a positive direction, the Delta variant of the COVID-19 virus emerges. With it has come renewed worldwide economic growth headwinds.

Disruptions in supply chain throughput and labor market shortages are starting to put a crimp in anticipated equipment finance business activity. As we near the end to the third quarter of 2021 and enter the fourth, it appears that there are more questions than answers regarding finance activity for the remainder of the year.

Heading into Q3, the Equipment Leasing And Finance Association’s (ELFA) Monthly Leasing And Finance Index (MIFI) reported that equipment finance activity in the second quarter increased 17% year-over-year and June volume only was up 28%.

This sounds promising and most indications have been relatively positive. But I believe we need to be a bit cautious given that reported increases are coming off pandemic recessionary activity level comparisons.

Here’s what we know:

  • International supply chain continues to be negatively affected by ongoing COVID pandemic influences
  • Raw material logistics, manufacturing processes, delivery channels, labor shortages are impacting product delivery and availability
  • Equipment deliveries are slowing. Depending on equipment type, equipment availability and related finance activity is being pushed out six, eight, 12 months or longer.

Here’s what to expect for the remainder of 2021 and beyond. All things being equal, new equipment is needed to run business operations, sustain relative competitiveness and generate business and economic growth. In the short-term, as equipment takes longer to get to market, anticipate lower finance funding volume for the remainder of 2021 and perhaps into the first quarter of 2022.

After that, batten down the hatches. The world will figure out the COVID battle and its influences will lessen. Evolved strategic supply shifts will surface. Pent up demand, labor market returns, manufacturing productivity gains, supply chain restoration, etc., will emerge. The economic funnel is filling up; it’s just backed-up some at the moment.

If there are lessons learned from today’s supply chain issues, materials shortages, and labor shortages they are that we all need to remove the “just-in-time” planning process from our business models. The on-demand supply chain that had been developed over so many decades is no longer an option. We all need to develop our long-term planning models and eliminate as much risk from our future business.

At Corcentric, we stand ready to help any fleet bridge that gap.  Now, more than ever, it’s crucial to make the right lease-versus-buy choice – those who do are more likely to emerge from the COVID crisis as industry champions positioned for growth.  To learn how we can help, contact Corcentric today.