Businesses have been facing unprecedented challenges trying to keep afloat and operate in the worst economic conditions in most of our lifetimes. Weak consumer demand, decreasing inventory levels, aging equipment and tight credit markets have had many businesses hobbled and waiting for signs of economic recovery. A recent study on the small business outlook for 2010 from CIT and Forbes Insights reported that 71 percent of small business owners agreed that they are working harder and longer to run their businesses.
However, evidence of optimism for the coming months is encouraging. The CIT/Forbes Insights study also reported that 60 percent of small business owners expect their revenues to grow or grow significantly in 2010, while a Duke University/ CFO Magazine Global Business Outlook Survey for the first quarter of 2010 reports that chief financial officers expect 15 percent growth in earnings and 9 percent growth in capital expenditures this year. These signs of optimism, while welcome, create more uncertainty for businesses.
Not knowing what the future will hold, smart businesses need to position themselves to take advantage of opportunities. Clearly, there’s a need to fund capital expenditures to acquire the equipment needed to operate and grow their businesses to meet not only today’s challenges, but also the pent-up demand that is expected to emerge once the economy grows again. Equipment leasing and financing plays a significant role in helping all types and sizes of commercial businesses in the United States acquire the equipment that they need, and its benefits provide the flexibility to manage business stresses, whether in times of uncertainty or prosperity.
Tight Availability of Credit
In the current economic environment where traditional banks are unwilling or slow to extend credit, equipment financing is a key option for businesses to consider. The Duke/CFO Survey reported that 70 percent of chief financial officers at small and midsize businesses report that credit conditions are worse or much worse than 2008. Despite efforts such as those by the Federal Reserve and other regulators focusing on initiatives for banks to extend credit and the Obama Administration to increase funds for Small Business Administration (SBA) loans, a Discover Small Business Watch survey from February 2010 reported:
- 70 percent of small business owners say federal stimulus efforts have had no impact on their businesses
- 76 percent of small business owners are “not very confident” or “not at all confident” that the federal government and Congress can address the needs of U.S. small business owners
- 91 percent of business owners say that they have never applied for an SBA loan
By comparison, credit approvals in the equipment finance industry, historically higher than those for bank loans, have been improving steadily.1 Access to credit is just one of the many benefits equipment financing provides to manage in an uncertain business environment.