Businesses Are In Expansion Mode

Sixty-five percent of Arizona business owners and executives plan on investing in their business in 2014, with upgrading and/or  purchasing new equipment, along with modernizing technology and systems, cited as their primary expenditures, according to an anonymous survey by independent research company Pollara released recently by BMO Harris Bank. That coincides with a favorable banking climate. “Across banking, we’re seeing some of the most robust competition that we’ve seen in the last three or four years,” says Tim Bruckner, Arizona managing director of Commercial Banking for BMO Harris Bank.

“It is a positive sign for the Arizona economy that a majority of businesses are feeling they are once again in a position to invest in their company,” Bruckner says. “We are seeing increased financing opportunities across a variety of sectors from businesses looking to invest in new technology and equipment or capital expansion.” Technology spending is especially hot in healthcare, food and agriculture, and general technology industries. In fact, Bruckner says that “healthcare accounts for about one-third of what we’ve done in Arizona … because of repositioning in the healthcare space to effectively meet the changing environment brought about by the Affordable Care Act.”

Among the 35 percent of Arizona respondents who are not planning to make business investments in 2014, the most popular reasons given are the state of the economy, the fact that their business is performing well enough, and upgrades are not seen as necessary at this time.

As for funding, nearly three-fourths (74 percent) of those planning to make investments in their business say they will do so with cash reserves. Eight percent plan to fund the investments entirely through borrowing, while 17 percent plan on doing a combination of both. “These findings demonstrate that the business community continues to be conservative in the use of debt for funding growth, stemming from what they learned during the recent recession,” says Jud Snyder, managing director and head of BMO Harris Equipment Finance Company. “However, intermediate-term borrowing should still be strongly considered as an option for financing growth with interest rates continuing at historic lows.”

Bruckner also observes, “There is a fair amount of capital spending related to projects that were contemplated for many years but were held off on until the economy proved strong enough.”

All of this activity is an encouraging sign, he says, because, as that money is spent and capacity begins to go into production, “we will see increases in hiring and expansion of the economy locally.” Additional hiring, he has found, follows after a company has been investing in itself in other ways, whether technology, capital expansion, new equipment or other areas.