8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): July 20, 2007

MICROFINANCIAL INCORPORATED

(Exact name of registrant as specified in its charter)

MASSACHUSETTS

(State or other jurisdiction of incorporation)

1-14771	04-2962824
(Commission file number)	(IRS Employer Identification Number)

10-M Commerce Way, Woburn, MA 01801

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 781-994-4800

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.02.    Termination of a Material Definitive Agreement.
	Item 2.02.    Results of Operations and Financial Condition.
	Item 9.01.    Financial Statements and Exhibits.
SIGNATURES
Ex-99 Press Release dated July 25, 2007

Item 1.02.    Termination of a Material Definitive Agreement.

     On July 20, 2007, the Registrant entered into a termination agreement with CIT Commercial Services, Inc., a unit of CIT Group (the “Lender”), reflecting the mutual termination of the parties’ rights and obligations under the Registrant’s $30 million senior secured revolving line of credit with the Lender.

     The Registrant and the Lender entered into the line of credit in September 2004 for a three year term. It was scheduled to expire on September 29, 2007. Under the line of credit, the Registrant could borrow a maximum of $30 million based on qualified lease receivables. Outstanding borrowings bore interest at prime plus 1.5% for prime rate loans, or at the 90 day London Interbank Offered Rate (LIBOR) plus 4.0% for LIBOR loans.

     The Registrant has previously announced that it did not intend to renew the CIT line of credit upon its expiration in September 2007. In connection with the termination, the Registrant repaid the Lender approximately $54,540 representing the outstanding balance on the line of credit. Neither party paid any penalties in connection with the early termination. In connection with the termination, the Lender released all security interests and liens that it held in connection with the Registrant’s secured line of credit.

     The Registrant is currently engaged in negotiations with another lending institution in connection with the arrangement of a replacement credit facility. Until such time as a replacement facility is finalized, the Registrant intends to fund new lease originations through cash on hand and cash flow from operations, and it does not anticipate that the termination of the CIT line of credit will have a material impact on its operations or financial condition.

Item 2.02.    Results of Operations and Financial Condition.

     On July 25, 2007, the Registrant announced its results of operations for the fiscal quarter and six month period ended June 30, 2007. Pursuant to Form 8-K, General Instruction F, the Registrant hereby incorporates by reference the press release attached hereto as Exhibit 99.

Item 9.01.    Financial Statements and Exhibits.

Exhibit	Exhibit Title
Exhibit 99	Press Release dated July 25, 2007

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MICROFINANCIAL INCORPORATED Registrant
By:	/s/ James R. Jackson, Jr.
	James R. Jackson, Jr.
	Vice President and Chief Financial Officer

Dated: July 26, 2007

EX-99

Exhibit 99

For Release July 25, 2007	Contact:
4:01 pm	Richard F. Latour
	President and CEO
	Tel: 781-994-4800

MICROFINANCIAL INCORPORATED ANNOUNCES
SECOND QUARTER 2007 RESULTS

Woburn, MA — July 25, 2007 — MicroFinancial Incorporated (AMEX-MFI), a financial intermediary specializing in vendor-based leasing and finance programs for microticket transactions, today announced financial results for the second quarter and the six months ended June 30, 2007.

Net income for the second quarter of 2007 was $1.4 million or $0.10 per diluted share based upon 14,129,399 shares, compared to net income of $0.5 million, or $0.04 per diluted share based upon 13,928,808 shares in the second quarter of 2006.

Revenue in the second quarter of 2007 was $7.5 million compared to $8.2 million in the second quarter of 2006 as expected declines in the rental income during the quarter were partially offset by growth in the leasing revenues associated with our originations. Revenue from leases was $2.7 million, up $2.0 million from the same period last year and rental income was $3.5 million, down $2.1 million from June 30, 2006. Other revenue components contributed $1.3 million for the current quarter, down $0.5 million from the same period last year.

Total operating expenses for the current quarter declined 28.4% to $5.2 million from $7.3 million in the second quarter of 2006. The second quarter 2007 provision for credit losses increased slightly to $1.7 million from $1.6 million in the second quarter of 2006 primarily due to the increase in lease receivables, while net charge-offs declined to $1.6 million from $2.3 million in the comparable period of 2006. Sequentially, amounts greater than 31 days delinquent as of June 30, 2007 decreased to $3.9 million from $5.4 million as of March 31, 2007. Selling, general and administrative expenses decreased 19.6% to $3.2 million from $3.9 million in the second quarter of last year primarily due to reductions in collection related and legal expenses. Interest expense declined 58.1% to $13,000, as a result of lower debt balances. Depreciation and amortization expense declined 79.3% to $0.3 million for the quarter, due to a decline in the number of rental and service contracts as well as the fact that a greater percentage of these assets are fully depreciated.

Cash received from customers in the second quarter was $10.1 million compared to $9.6 million during the same period in 2006. New originations in the quarter increased by 22% to $12.4 million for the second quarter 2007, compared to the first quarter 2007.

Richard Latour, President and Chief Executive Officer said, “I am pleased with our continued progress in growing the business. In the second quarter of 2007, new contract originations improved to $12.4 million, an increase of $9.2 million from the second quarter of 2006. In addition we had our largest quarter for vendor approvals at 208 new vendors bringing the total vendor count to approximately 1,550. We also processed over 9,300 applications, an increase of over 5,400 applications as compared to the same period last year.”

For the six months ended June 30, 2007, net income was $2.7 million versus net income of $1.3 million for the same period last year. Net income per diluted share year to date was $0.19 based on 14,101,436 shares versus $0.09 for the same period in 2006.

Year to date revenues for the six months ended June 30, 2007 decreased 12.0% to $15.0 million compared to $17.1 million during the same period in 2006. Revenue from leases was $4.7 million, up $3.3 million from the same period last year and rental income was $7.4 million, down $3.9 million from June 30, 2006. Other revenue components contributed $2.9 million, down $1.5 million from the same period last year. New contract originations year to date June 30, 2007 were $22.5 million versus $6.1 million through the same period last year.

Total operating expenses for the six months ended June 30, 2007 declined 27.9% to $10.8 million versus $14.9 million for the same period last year. Selling, general and administrative expenses declined $1.4 million to $6.7 million and depreciation and amortization expenses declined 76.4% to $0.8 million. Significant factors in the decline of the SG&A expense include declines in legal expenses of $0.5 million and collection expenses of $0.5 million. The provision for credit losses remained flat at $3.2 million year to date, as compared to the same period last year. Year to date net charge-offs declined to $3.5 million as compared to $5.1 million for the same period last year. Interest expense declined 76.8% to $26,000 year to date. Headcount at June 30, 2007 was 74, up from 71 at the end of the same period last year. Year to date cash from customers was $19.6 million as compared to $21.8 million for the same period last year.

Richard Latour adds “We are pleased that the Company was added to the Russell Microcap Index during the second quarter. The Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies. We expect our inclusion will generate greater interest in our stock at an institutional level.”

MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	December 31,			June 30,
	2006			2007
ASSETS
Cash and cash equivalents	$	28,737		$	18,109
Net investment in leases:
Receivables due in installments		40,455			61,634
Estimated residual value		3,859			6,342
Initial direct costs		302			488
Less:
Advance lease payments and deposits		(50	)		(65	)
Unearned income		(13,682	)		(23,347	)
Allowance for credit losses		(5,223	)		(4,884	)
Net investment in leases		25,661			40,168
Investment in service contracts, net		613			377
Investment in rental contracts, net		313			188
Property and equipment, net		655			711
Other assets		652			642
Deferred income taxes, net		3,090			1,536
Total assets	$	59,721		$	61,731
LIABILITIES AND STOCKHOLDERS’ EQUITY

	December 31,		June 30,
	2006		2007
Notes payable	$	5	$	44
Accounts payable		1,038		829
Dividends payable		691		697
Other liabilities		1,110		803
Income taxes payable		741		647
Total liabilities		3,585		3,020
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued at December 31, 2006 and June 30, 2007		—		—
Common stock, $.01 par value; 25,000,000 shares authorized; 13,811,442 and 13,944,096 shares issued at December 31, 2006 and June 30, 2007, respectively		138		139
Additional paid-in capital		44,136		45,436
Retained earnings		11,862		13,136
Total stockholders’ equity		56,136		58,711
Total liabilities and stockholders’ equity	$	59,721	$	61,731

MICROFINANCIAL INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2007		2006		2007
Revenues:
Income on financing leases	$	724	$	2,653	$	1,396	$	4,686
Rental income		5,594		3,514		11,315		7,438
Income on service contracts		488		329		1,043		690
Loss and damage waiver fees		493		473		1,044		917
Service fees and other		535		330		1,638		716
Interest income		323		247		638		570
Total revenues		8,157		7,546		17,074		15,017
Expenses:
Selling, general and administrative		3,926		3,158		8,133		6,726
Provision for credit losses		1,627		1,677		3,237		3,200
Depreciation and amortization		1,674		347		3,439		810
Interest		31		13		112		26
Total expenses		7,258		5,195		14,921		10,762
Income before provision for income taxes		899		2,351		2,153		4,255
Provision for income taxes		361		902		851		1,589
Net income	$	538	$	1,449	$	1,302	$	2,666
Net income per common share:
Basic	$	0.04	$	0.10	$	0.09	$	0.19
Diluted	$	0.04	$	0.10	$	0.09	$	0.19
Weighted-average shares:
Basic		13,786,523		13,912,228		13,774,816		13,886,524
Diluted		13,928,808		14,129,399		13,918,788		14,101,436

About The Company
MicroFinancial Inc. (AMEX: MFI), is a financial intermediary specializing in microticket leasing and financing. MicroFinancial has been operating since 1986, and is headquartered in Woburn, Massachusetts.

Statements in this release that are not historical facts, including statements about future dividends or growth plans, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “expects,” “views,” “will” and similar expressions are intended to identify forward-looking statements. We caution that a number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Readers should not place undue reliance on forward-looking statements, which reflect our views only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. We cannot assure that we will be able to anticipate or respond timely to changes which could adversely affect our operating results. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results or other factors may result in fluctuations in the price of our common stock. For a more complete description of the prominent risks and uncertainties inherent in our business, see the risk factors described in documents that we file from time to time with the Securities and Exchange Commission.