Businesses have been facing unprecedented challenges trying to keep afloat and operate in the worst economic conditions of 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.

Evidence of optimism for the coming months is encouraging, however. 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 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 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, according to data from the Equipment Leasing and Finance Association. Access to credit is just one of the many benefits equipment financing provides to manage in an uncertain business environment.

Equipment Finance Benefits In addition to greater credit availability, equipment financing is tailored for critical business considerations, including cash flow and future capital necessary for future growth. The CIT/Forbes Insights study reported that in 2010, 50 percent of small businesses plan to invest in growth and expansion, and 50 percent also plan to hold on to their cash instead of reinvesting it in the business. Equipment financing can help businesses meet these goals and better manage their equipment acquisitions through the following benefits:

Flexible Financing
The types of financing solutions equipment finance companies offer, especially leases, are flexible and can be tailored to specific accounting, tax, or cash flow needs of the customer. They range from fair-market value (FMV) lease transactions and capped FMV leases to full payout loans.

100 Percent Financing
A lessee or borrower may be able to obtain 100 percent financing of equipment. Costs include hard costs such as the equipment and soft costs such as shipping and taxes, design costs, installation costs, transportation fees, training fees, software, and any service contract fees.

Improved Expense Planning and Business-Cycle Flexibility
Financing equipment helps maintain cash flow and greater certainty in budgeting by setting customized rent payments to match cash flow. Some types of leases allow for seasonal business fluctuations, lower monthly payments while a project is ramping up and revenue not yet being generated from the equipment, and other specific circumstances your business may experience

Preservation of Capital
Making large capital expenditures in equipment often represents major financial risk, especially for small companies. Equipment financing can help mitigate the uncertainty of investing in a capital asset that may enable a business to achieve its desired return, increase efficiency, save costs and apply capital to more pressing needs of its operations.

Regular Technology Updates/Obsolescence Management
By funding technology equipment under leasing, loan or other financing, companies are often able to acquire more and better equipment than they could have without financing. Certain leasing finance programs can also allow for technology upgrades and/or replacements within the term of the lease contract. Managing obsolescence is a strategic consideration for businesses. The risk of owning obsolete equipment (for instance, IT equipment) is eliminated if you use lease financing for your acquisition, since many financing agreements allow for easy and fast equipment updates.

Relationships with Equipment Experts
Some equipment finance companies are equipment experts and offer equipment services that other sources of financing do not. Equipment finance experts may have special relationships with manufacturers and distributors. Many equipment financiers specialize in certain equipment types or industry category, such as IT, office equipment, transportation, manufacturing and medical, to name a few. Dependable Asset ManagementMany financing companies can help track the status of equipment, know when to upgrade or update it, and can provide services relating to installation to use, maintenance, de-installation, remarketing and disposal of the equipment.

Equipment Disposal
Equipment management by a third party, such as an equipment financing company, should enhance the ability of a business to focus on its core operations. In the case of computers and other technology devices, these companies may also help dispose of such equipment. This service should prevent the lessee or borrower from incurring legal penalties for improperly disposing of electronic assets, which is often regulated by federal, state and local governments.

Risk Management
Equipment purchases involve risk to the owner-from equipment expertise to capital outlays, from asset management to obsolescence-which become the burden of the equipment owner. Financing removes many unnecessary risks, allowing you to focus on your business.

At a time when businesses are weighing mixed economic signals and facing tremendous business stresses, acquiring equipment through financing offers valuable financial and strategic benefits. Businesses who want to learn more about equipment financing may visit, an informational website that has types of financing, a glossary of terms, a lease vs. loan comparison, questions to ask when financing equipment and other resources.
Ralph Petta is interim president of the Equipment Leasing and Finance Association, the trade association that represents companies in the $518 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. For more information, please visit