Small Firms Forego Cost-Cutting, Spend More on Plants and Equipment

Rather than slashing costs, small businesses are now spending more on new plants and industrial machinery, trucks, computers, office equipment and furniture, reported the Wall Street Journal.

Among 798 small private firms with less than $20 million in revenue, 51% said in August that they planned to increase their capital spending in the next 12 months. That is a record high, and it is also up from 42% a year ago, according to the survey by WSJ and Vistage International, an executive-advisory group.

The survey also indicated that owners of small firms who planned to spend more on fixed investments outnumbered those who planned to hold steady or cut back. Those who planned to increase capital outlays were owners and CEOs at firms in a range of industries, including service (17%), manufacturing (10%) and finance and insurance (nearly 5%).

Separately, in a July survey of 1,645 private firms—nearly all with fewer than 40 employees—55% said they had made capital outlays during the previous six months. In December 2013, when a number of tax breaks for equipment purchases were set to expire, 64% said they made such outlays. Most shelled out between $10,000 and $49,000, in line with their past trends, according to the National Federal of Independent Business. Ten percent spent more than $100,000.

Meanwhile, many companies had been putting off reinvesting in their equipment, but can no longer delay those investments as the equipment ages.

Banks seem more willing to once again lend to small businesses, and that has allowed them to expand operations, according to economists. S