The Impact Of Macroeconomic Variables On A Vector-Autoregressive Forecast Of Small Ticket Equipment Lease And Loan Portfolio Performance

Equipment financing is a trillion dollar industry that covers small and medium sized businesses across the entire spectrum of business categories. These transactions are typically scored utilizing the owners’ personal credit, with business credit adding additional information to the credit decision. For this paper, the portfolio performance of a publically traded company that finances small ticket equipment leases and loans will be examined. Utilizing data points gathered from thousands of leases and loans over a four-year period, transactions were run through three different econometric models and forecasted for a subsequent two-month period. Macroeconomic variables were then introduced to the econometric model to determine whether or not they increase the accuracy of this prediction, and by how much they either increase or decrease said forecasts