The commercial equipment finance and leasing industry is 100% resilient and will continue to thrive. There are many professionals in the industry that have not experienced a major economic downturn. Most originators in the industry have never sold in a rising interest rate environment. Many have forgotten the lessons learned from the 2008 downturn, the 2000 bust of the dot.com bubble, the savings and loan crisis of the late 1980's and early 1990's, or the super inflation followed by stagflation in the late 1970's and early 1980's. Recessions are a natural part of economic cycles and are not to be feared, but rather to be planned for and navigated through with a focus on the future.

Since WWII there have been 12 recessions with the average length of a recession being 10 months. The 2008 recession lasted 19 months and the 2020 recession (although the worst on record) only lasted two months. Today, the Federal Fund rate is below 2% with an expectation to rise in the 3.0% to 3.5% range by the end of 2022. Since 2008, the Federal Fund rate has been consistently below 3.5%; however, for most of the three decades before 2008, the Federal Fund rate was above 3.5%. (The Federal Fund rate in June of 1981 was 20%.) From a historical perspective, the anticipated rise in interest rates is modest. Some economists believe greater increases will be needed to fully tame inflation. The major difference with the current pending recession is the US national debt (in 1981 the national debt was less than $1.0T, in 2008 the national debt was approximately $10.0T, in 2020 the national debt was approximately $26.0T and today it is above $30.5T).

The US economy and the commercial equipment finance and leasing industry have enjoyed a long stretch of extremely low interest rates which fueled capital expenditures by businesses and consumers. The current rising interest rate posture of the federal reserve to counter inflation and the nearly certain impending recession which will follow will create new challenges for the industry. These challenges will also create new opportunities for participants that do not panic or overreact.

The good news is that businesses always seek out efficiencies and cash flow savings during challenging times. Essential commercial equipment usually provides greater efficiencies for businesses, while financial products provided by the commercial equipment finance and leasing industry provide cash flow savings. The commercial equipment finance and leasing industry continues to support small, medium, and large businesses and is a critical participant in every economic recovery.

I was recently asked by a seasoned professional what he and his team should be focused on over the coming months as we enter a recessionary period. My immediate response was the same as it is during every stage of any economic cycle. "Focus on quality." Savvy participants are reminded of the basic rules which create sustainability in all economic environments. Quality matters:

• Quality talent within the organization which works as a team to create quality assets
• Quality vendors with the financial strength to withstand a downturn
• Quality end-users that have the credit requirements to sustain themselves during all economic cycles
• Quality collateral that will support outstanding balances
• Quality systems to help predict new opportunities and new challenges (AI)
• Quality funding capabilities that remain committed throughout all economic cycles.

Now is the time to solidify relationships. Now is the time to focus on those proven activities and processes that produce the greatest results. Now is the time to flaunt your value proposition.