Equipment Finance Confidence Surges to 11-Month High — But the Fine Print Matters

The Equipment Leasing & Finance Association's January 2026 Monthly Confidence Index jumped to 64.6, up from 58.3 in December — the highest reading since February 2025.¹ Meanwhile, December borrowing hit $10.6 billion, up 5.9% year-over-year and the second-highest monthly total in the industry's history.²

• Business Conditions: 34.6% of executives expect improvement over the next four months, up from just 12.5% in December. Only 7.7% expect conditions to worsen.¹

• CapEx Demand: 40% expect increased loan and lease demand, nearly double December's 20.8%.¹

• 2025 Volume: Total new business volume is expected to exceed $117 billion, positioning 2025 as the second-best year on record since the CapEx Finance Index began tracking in 2006.³

• Tariff Pre-Buy Effect: Industry executives report customers are accelerating purchasing decisions ahead of anticipated cost increases from tariffs.¹

• Bank Competition Warning: James D. Jenks, CEO of Global Finance and Leasing Services, warns that "as interest rates and the economy improve in 2026, the equipment finance industry will likely be facing more competition from banks, the larger independents and new entrants."¹

The headline is bullish, but we're seeing significant divergence beneath the surface: banks are gaining share, transportation is still hemorrhaging, and pricing dynamics are shifting in ways that could squeeze independent lender margins hard in H2 2026.

_{Sources
1 Globe Newswire | Equipment Finance Industry Confidence at 11-Month High
2 Reuters/Spokesman | U.S. business borrowing for equipment rises over 5% in December
3 Globe Newswire | CapEx Finance Index October 2025
4 Globe Newswire | CapEx Finance Index November 2025
5 Monitor Daily | ELFA CapEx Finance Index: Recent Rate Cuts Expected to Bolster Equipment Demand Heading into 2026
6 ELFA | Equipment Finance Industry Sees 3.1% Growth in New Business Volume Amid Tightening Credit in 2024
7 ELFA | CapEx Finance Index July 2025
8 Equipment Finance News | 8 more trucking companies go bankrupt, 2 shut down
9 Equipment Finance News | 12 more freight carriers go bankrupt amid lender pullback
10 Equipment Finance News | Experts weigh in on distress, bankruptcies in trucking
11 altLINE | Trucking Company Bankruptcies Continuing in 2025
12 Monitor Daily | Funding, Risk & Growth: What's Next For Equipment Finance In 2025?
13 BSB Leasing | Mid-Year 2025 Equipment Finance Review
14 NerdWallet | Average Business Loan Interest Rates: January 2026
15 LendingTree | Average Business Loan Rates for 2026
16 Huntington Bank | 2025 Equipment Finance Trends
17 Equipment Finance News | High interest rates weigh on equipment lender confidence
18 Equipment Finance News | Equipment finance originations spike 5.7%}

What Alternative Business Lenders Need to Know

The Pricing Picture: What Spreads Are Actually Doing

Let's start with what was missing from most coverage of this news: pricing data.

Average business loan rates at banks currently range from 6.7% to 11.5% APR for fixed-rate term loans, with variable rates running 7.2% to 7.8%.¹⁴¹⁵ Equipment-specific financing spans 4% to 45% APR depending on credit quality and lender type — banks at the low end, alternative lenders at the high end.¹⁴

Here's the competitive reality: with SOFR currently around 4.3-4.4%, banks can price prime equipment deals at SOFR + 200-350 bps (6.3-7.8% all-in) and still hit their return targets. Alternative lenders with warehouse lines at SOFR + 300-400 bps need to price at minimum 10-12% to maintain margins — which means a 300-500+ bps pricing gap on the same deal.

That gap narrows as you move down-credit. For borrowers with 650 FICOs, limited time-in-business, or seasonal cash flows, banks generally won't play. That's where independents maintain pricing power. But for the "bank-adjacent" credits — 680+ FICO, 3+ years TIB, $500K+ revenue with clean financials — competition is intensifying.

The Fed's 75 bps of cuts in Q4 2025 helped, but didn't fundamentally change this dynamic. If you're losing deals to bank pricing on clean credits, that's not going to reverse unless spreads compress further.

Credit Quality Breakdown: Where the Problems Actually Are

The aggregate numbers look healthy: overall delinquency at 2.0-2.2%, loss rates at 0.44-0.50%, approval rates at decade highs.⁴ But institution-type breakdowns tell a different story:

Delinquency Rates by Institution Type (November 2025):⁴ 

• Banks: ~1.5%
• Captives: ~2.0%
• Independents: ~3.2%

Loss Rates:⁴ 

• Banks: ~0.39%
• Captives: ~0.41%
• Independents: ~0.80%

Independents are running delinquency rates 2x banks and loss rates 2x captives. That's the cost of serving harder credits — but it also means less margin for error if the portfolio mix shifts wrong.

What's driving the divergence?

Three factors:

1. Transportation concentration: If your book is heavy on trucking, you're feeling it. Mining/oil & gas extraction and transportation-railroad continue to show the highest delinquency rates across equipment types.⁶ More than 30 trucking companies filed Chapter 11 since Q2 2025.¹⁰ Banks like M&T are showing $400K+ unsecured claims tied to truck portfolios in individual bankruptcy filings.⁸

2. 2022 vintage exposure: As one industry executive noted, "Most of that stress came from the 2022 vintage which is now about 80% aged. While there is still a tail on that 2022 vintage, the 2023 and 2024 vintages are performing significantly better."¹²

3. Small ticket concentration: Small ticket delinquencies run at 2.2-2.3% vs. ~2.0% overall.⁷ If your portfolio skews sub-$150K deals, your credit metrics will run hotter.

Bank vs. Independent: The Volume Shift

The competitive dynamics are clear in the numbers:

Year-to-date volume growth (through October 2025):³ 

• Banks: +6.5%
• Captives: -15.6%
• Independents: -2.4%

Approval rates (October 2025):³ 

• Banks: 82.1% (record high)
• Captives: 82.0%
• Independents: 70.7%

Banks are simultaneously gaining volume share AND loosening credit standards (higher approval rates). That's not sustainable unless they're seeing genuinely cleaner deal flow — or they're reaching for yield.

For independent lenders, the 70.7% approval rate vs. banks' 82.1% represents both a challenge and a moat. You're turning away deals banks would take, which keeps credit quality higher but limits volume. The question is whether the deals you ARE winning justify the higher cost of capital.

Sector-Specific Opportunities: Where to Focus

AI infrastructure sounds great but isn't realistic for most alternative shops. Here's where the actual opportunity lies:

Healthcare/Medical Equipment¹³:

84% of medical equipment acquisitions are financed rather than purchased outright. Healthcare providers upgrading imaging equipment or adding telehealth capabilities offer predictable cash flows from insurance reimbursements. Typical ticket sizes ($50K-$500K) fit independent lender capabilities. The borrower profile — established practice, recurring revenue, essential services — represents the kind of deal independents can win on service and speed even at premium pricing.

Landscaping and Outdoor Trades¹³:

Projected 6% CAGR, driven by labor shortages pushing equipment investment. Equipment holds value well, customer bases are typically diversified across residential and commercial, and year-round revenue (add snow removal) demonstrates management sophistication. Key underwriting point: look for operators serving BOTH residential and commercial customers with seasonal diversification.

Infrastructure-Adjacent Construction¹³:

The Infrastructure Investment and Jobs Act continues driving demand through 2026 for trenching, paving, and directional boring equipment. Contractors with federal project contracts have strong revenue visibility. Equipment types in demand: horizontal directional drilling rigs, specialized utility trucks, excavator attachments. The key: can the borrower document committed project pipeline?

What to Avoid:

Transportation/Trucking: Over 30 Chapter 11 filings since Q2 2025.¹⁰ Spot rates for dry van at $1.65/mile vs. $2.26/mile operating costs.¹⁰ Lenders are exiting the space entirely — Midland States Bancorp stopped financing equipment on September 30, citing credit issues "primarily in the trucking industry."⁹ The Bank of Montreal is exploring sale of its transportation finance arm.⁹

One expert put it bluntly: "I think the canary in the coal mine is when you see 71-year-old truckload carriers like Carroll Fulmer decide to close up shop because it's no longer economically viable."¹⁰

The Tariff Pre-Buy Question

Isuzu Finance EVP Jim DeFrank's observation that a "tariff pre-buy effect is occurring, as customers accelerate purchasing decisions ahead of potential cost increases" deserves scrutiny.¹

This is the right observation but potentially the wrong conclusion for lenders. If customers are pulling forward purchases to beat tariff-driven price increases, that demand is being borrowed from Q2-Q3 2026. The confidence survey captures intent today — it doesn't capture the air pocket that could follow.

When evaluating tariff-motivated deals, ask: would this customer be buying this equipment regardless of tariffs, or are they accelerating timing? Equipment that's truly needed for operations is good collateral. Equipment bought to front-run price increases may sit underutilized if business conditions soften.

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