By: Joe Andries on July 6th, 2020
And Then There Was a Pandemic
Originally published in NEFA Newsline Magazine’s May/June 2020 Issue
The COVID-19 pandemic is impacting portfolio performance for many equipment finance companies and will continue to influence what portfolio management will look like for the foreseeable future.
"But comparing what happened 12 years ago to the pandemic would be a mistake. Though there is some logic to the distress we are seeing in the hospitality, travel and restaurant industries, some ‘safe havens’ are taking a huge hit.
In the short term, responding to the realities of the situation and developing strategies around extension/deferral plans is probably the first line of strategy for most equipment finance companies. The majority of lessees (our clients’ customers) are looking at some sort of assistance for at least 60 to 90 days, whether it be with reduced payments or deferral of payments to the end of the contract. All requests we receive are sent to our client for review. Not a lot has changed for us, considering we will always take direction from our clients as we honor the bond between them and their customers. The biggest operational change is probably the sheer number of people calling looking for assistance.
There are pockets of nuance across all markets, and it’s important to respond and activate specific plans that incorporate deep knowledge of the customer’s situation. With the help of our clients, we are doing everything we can to help get their customers back on their feet. When the fog lifts, we expect some areas of bounce-back where there’s pent-up demand.
In the long-term, which seems so far away right now, how equipment finance companies respond to delinquency and loss management will be guided only marginally by past experience. They will have to dig deeper into the data and examine why certain segments had been pummeled. The historical and reliable strength of businesses based on professional designations will now have to be re-evaluated. External factors such as the effectiveness/deployment of the CARES Act and relationship depth will still be part of the mix in determining portfolio management strategies.