We periodically run news about the capital equipment leasing and financing business. It’s a good harbinger of economic health because, after all, if companies are seeking financing, they must be getting business, right?
Let’s be cautious about this. That’s the attitude financing executives project when they’re asked their feelings about the economy. “I’m cautiously optimistic.” That’s a pretty safe assessment. It protects their credibility no matter which way the economy goes. A better economic barometer is to ask the manager of a small business. Better yet, watch what they do.
The economy for manufacturers in Northeast Ohio, which I call home, has been shaky in recent years. However, an article in the Cleveland Plain Dealer reported today that small companies in Northeast Ohio are enjoying more opportunities for growth than counterparts in other parts of the country. It cited a survey by the Council of Smaller Enterprises (COSE) and quoted an executive from a local software firm who said that relationships developed in this part of the country have turned into gateways to relationships with national clients.
The article quotes another executive who attributes his success to the ability to change and adapt. He financed equipment that enabled his 67-year-old company to change from a screw machine manufacturer to a precision machine parts manufacturer. This transaction was also a preemptive strike against future labor costs.
This is walking the talk of William G. Sutton, president and CEO of the Equipment Leasing and Finance Association, whose article “How Equipment Financing Supports Entrepreneurs” was just posted to MH&L’s site. Sutton explains that financing enables businesses to acquire more and better equipment and that it is easier to do so under the terms of a lease contract. Also, since the lessor owns the equipment, it bears the risk of the equipment becoming obsolete.
Sutton adds that lessors also offer services that track the status of equipment for periodic maintenance and upgrades. If that doesn’t sound like the work of a logistics service provider, Sutton’s concluding line sure does:
“Equipment management by a third party, such as an equipment financing company, can enhance the ability of a business to focus on its core operations.”
Ultimately, the thing that will determine the success of both financing companies and their clients is the talent at both ends of this relationship. An article in the Dayton Daily News says that one in four manufacturing workers in Ohio is 55 or older, which means a wave of retirement is coming, widening the gap between skilled labor and the demand for that labor. This isn’t just an Ohio thing, or just a manufacturing thing. It’s a problem facing all industries, including service providers and service consumers. Technical schools aren’t graduating enough talent to fill the void, so it’ll be up to employers to manufacture their own.
Remember that precision machine parts manufacturer I mentioned a few paragraphs back whose investment in technology was a hedge against future labor costs? Nothing’s more expensive that unavailable talent. So when budgeting for your future needs, factor that into your calculations.