“ It's impossible to know what the future will look like when we finally get there. But we do know it's going to look nothing like the past .”

- Anonymous

An increasing number of people from the business community continue to experience turning of the economic tides. Many economists have stated that the commercial equipment financing / leasing industry is usually a leading indicator in the economy. We, at First Star Capital, continue to experience steadily improving activity levels. The great recession is clearly fading, just as recessions of the past have, and approval ratios are improving as well. The Federal Reserve recently stated that consumer spending is starting to pick up amid a “moderate” expansion, and that the “economic recovery is expected to continue through the fall.”

However, many business owners and corporate executives appear to feel that the economy is in a state of suspended animation. Until they see quantifiable improvements in financial metrics, they will remain in a reactive posture, distrustful of what bright spots there might be. This caution is compounded by the unprecedented threats and rhetoric coming from Washington DC .

Until the government begins to signal a more predictable and rational direction to its actions, it's going to be a long year for the business community including banks and independent lenders / lessors. The community and regional banks appear to be frightened of this Congress and continue to sit on their cash. These banks seem to be ignoring customer demand, and most banks agree, they have seen far too much of regulators in the past year. While the regulators are concerned about safety and stability, and don't appear to care if there is ever another dime lent. However, at the same time Washington DC is demanding that banks ramp up lending volume / activity almost irrespective of credit quality. This sews confusion about the government's ultimate policy aims.

Although the positive trends may seem small to some, we are seeing a clear increase in demand for equipment from businesses. Perhaps, it is the proverbial pent up demand that is slowly being released, because it seems that much of the spending is geared toward replacing older equipment after recession-related postponements or to improve efficiency (especially in technology and energy efficiency), as opposed to raising production or job creation. In fact, according to a recent article in The Wall Street Journal , companies in the US are stepping up purchases of equipment and software at the fastest pace since the late 1990's. However, the bulk of this purchasing appears to be going into maintenance, improving energy efficiency and meeting regulatory standards, rather than boosting capacity.

There is a sense within the equipment finance industry that what the government does and says – and what it doesn't do or say – are more important to the industry sector in 2010 than any other time in decades. While things in the external macro-economic environment are clearly improving, albeit at a relatively slow pace, many small to medium sized businesses need only see a small improving trend in the total economy to realize significant increases in their own operations.

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About Vendor Financing 101

Vendor Financing 101 is a strategic tool box for top performing equipment vendors nationally.  Businesses that sell equipment experience an immediate jump in sales when they implement an effective equipment financing or equipment leasing program.  Business owners and sales people constantly report sizeable increases in their sales volume after implementing an equipment finance program for their customers.  The vendor finance group is the fastest growing division within First Star Capital. Read More »

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August 2010

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