In doing our part to help the economy recover, my wife just bought a Kindle. If you don’t know what that is, it’s a digital book reader sold by Amazon.com. Basically it’s a device that lets you download and read books. Pretty neat stuff.
I’ll be the first to admit that her want for the Kindle was more selfish than “let’s help the economy out”, but I digress. The point that I want to make is this gadget is a profound statement that the world, and business, are changing. I recall a scene in “Other People’s Money”, when Danny DeVito’s character said “I’ll bet the last buggy whip manufacturer made the best buggy whip you ever saw… how would you like to be a stockholder in that company today?” (I’m paraphrasing.) A great scene, and a fairly good sentiment as well.
So what does this have to do with equipment financing?
Simple – the world is changing, and equipment financing can help you change with it. Because most equipment financing companies will finance software.
I realize I’ve mentioned this before in the blog (sometime last year), but it’s something I want to repeat every so often because financing software is not something most companies think about. The reason they don’t think about it is simple – banks generally won’t write a software lease. Software is generally not something you can see, feel, or smell, so many old-school lenders have trouble seeing the “equipment” there. But tell me – is the software that makes Kindle possible really any different than a printing press in terms of getting a book to a reader? I’m telling you it’s not – thus, the more forward thinking equipment financers have embraced financing software.
Now, I’m not telling you every company needs to finance software or go the way of the buggy whip. Not true at all. But maybe, just maybe, someone reading this says “gee, I didn’t know that… you know, we were thinking of developing something that…” and the light bulb goes on. And then maybe then old Fletch does HIS part in helping the economy too.
But yes, software financing is something that’s not only possible, but could be a real boon to many companies with more ideas than liquid capital at the moment.
Ok, let’s continue a bit with the “better times coming” theme I’ve been on lately (my wife tells me that besides being a top notch equipment financing guy, I’m also I’m a silver-lining type person… ok, I’m making up the first part – she really doesn’t care about my equipment financing prowess – but she does think I always make the best of things.) 
Anyway, I had this thought the other day after looking at baseball box scores. It occurred to me that despite the doom and gloom of the last few months, things have moved forward, like they always do. Spring came, April turned to May, flowers bloomed, baseball season started…. None of it seemed affected one bit by the Dow Jones Industrial Average. It’s almost as if the flowers just didn’t listen, and said “we’re coming, like it or not.” And, of course, the umpire said “Play Ball”.
So it struck me as comforting knowing that no matter what the financial bad news is, things are still going to move forward. I’m reading about baseball, and I see the Yankees and Mets both opened brand new stadiums this year… and of course, my mind turns to “I wonder how much equipment was financed?…. I wonder how many equipment leases were written?” I’ll bet tons of equipment leases were written, from cooking equipment in concession stands to security equipment to that fancy scoreboard.
Not to get off track here, but are you beginning to see why my wife thinks I was such a great catch? My wife loves facts and figures, and always dreamed of a guy who looked at structures and thought “I wonder if they got a capital lease?”… I’m kind of kidding. My wife rolls her eyes when I do stuff like that (and to be honest, I do try to find a romantic component to discuss as well, like “I wonder how many guys proposed on that balcony…. And did they finance the ring?”) Ok, I’ll stop J
But yes, it was definitely reassuring to realize that 2009 is steadily progressing. Truth be told, we’re closing in on the halfway point, really. And we’re all still here.
Technorati Tags: baseball, capital lease
Let’s answer an e-mail question:
Dear Fletch,
I read a few of your posts where you essentially make sure your readers know that equipment financing is a good thing, and that you’re still here financing equipment while banks pull back. Ok, maybe so, but isn’t “credit” the reason we’re in this mess in the first place? And isn’t egging companies on to finance equipment just adding fuel to the fire?
Justin G
Justin,
Thanks for writing, and thanks for reading the blog. I’m always encouraged when people read and take the time to write.
I understand the gist of your point, and while it’s valid on the surface, it’s a bit of an oversimplification. It’s not “credit” that got us into financial trouble. It’s IRRESPONSIBLE credit. THAT’S what tipped the gas barrel over and fired up the flamethrower.
Credit, in and of itself, has been around since trading began thousands of years ago. It came into existence for one reason – it’s fully necessary for growth. Without credit, a business has a very hard time growing.
Let me use a simple example of an old time baker. A particular baker makes the best bread in town – it’s so good that everybody wants his bread. Demand for the bread increases – to keep up with this demand, the baker needs a bigger oven… heck, he needs a bigger store. Otherwise, he will “top out” – there are only so many loaves he can make in a day, and so much profit per day out of his store. To “save up” and buy a new oven and store for cash would take years.
Enter the money-lender. He can loan the baker the money for the new oven and store. This will allow the baker to increase business (and profit) tenfold. Paying back the loan will be easy – the increased business makes this a very good risk. And, the moneylender profits to – he charges a fee (interest) on the loan. His money is making money… everybody wins.
That’s a simplified example, but that’s generally how it’s supposed to work. Credit allows those with sound business practices to expand their businesses (hopefully to make more money), and it also allows those who lend to make money on their money (which has been a staple of wealth building for centuries.) In fact, without credit, almost everything stops in regards to commerce.
No… credit isn’t responsible for this mess. In fact, we need credit to get ourselves solvent again.
But we have to use it wisely. The “let’s loan people with a terrible payback history LOTS OF MONEY to buy a house” stuff that happened was beyond dumb. And THAT’S what got us into trouble (it was more than just subprime mortgages – there are many more abuses of credit besides that, but it’s a handy example.)But equipment financing? Let me tell you, Justin – for a responsible company, financing equipment is easily one of the best uses of credit out there. It’s the baker story on a larger scale.
Now, I am not advocating that any old business go and finance equipment (the new startup “Dave’s worms and stuff” can pay cash for their dirt, ok?) What I am saying is that a healthy company with smart leadership and a solid track record can definitely put an equipment lease to good use, both right now, and for the future.
