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42% of Business Owners to Upgrade, Buy New Equipment in 2014

March 14, 2014, 07:02 AM
Filed Under: Economic Commentary

BMO Harris Bank released a study that found that the majority of business owners/executives plan on investing in their business in 2014, with upgrading/purchasing new equipment being their primary planned expenditure.

"The U.S. economic recovery is being led by businesses, large and small, that are expressing confidence in their prospects for the future," said Dave Casper, Executive Vice President and Head, Commercial Banking, BMO Harris Bank. "They're displaying their confidence in a variety of ways – from technological and equipment purchases, to investments in their most valuable asset, their people."

When business owners/executives were asked where they would make those business investments:

  • 42 percent said they would upgrade or purchase new equipment
  • 26 percent planned on hiring more employees
  • 25 percent were focused on modernizing technology and systems
  • 24 percent planned on expanding operations

"The numbers shouldn't come as a surprise," added Jud Snyder, Managing Director and Head, BMO Harris Equipment Finance Company.  "They reflect what we've seen over the past 18-24 months, with companies making more investments in capital expenditures for both maintenance and expansion."

Thirty-six percent of respondents were not planning on making business investments in 2014, with the most popular reasons being the state of the economy, a lack of capital and quite simply the fact that upgrades weren't necessary at this time.

Notably, business executives and owners of companies with revenues of over $20 million per year were particularly bullish, as over 80 percent planned on investing in their business in 2014. 

Financing Options Vary

The majority (58 percent) planned on making their business investments with cash reserves. Eleven percent planned to fund the investments entirely through borrowing, while 31 percent planned on doing a combination of both.

"These findings display continued conservatism when it comes to the use of debt for funding growth, a conservatism that stems from lessons learned during the recent recession," said Snyder.  "However, with interest rates still at historically low levels, in many cases, intermediate-term borrowing should still be strongly considered as an option for financing future growth."

"All of us at BMO Harris Bank are committed to helping businesses grow and doing our part to continue to encourage the business-led economic recovery," added Casper.

The survey was conducted by Pollara with an online sample of 601 American business owners in November, 2013. A probability sample of this size would be accurate to +/- 4%, 19 times out of 20.

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