For Immediate Release                                 Contact:
                                                      Richard F. Latour
                                                      President and CEO
                                                      Tel: 781-994-4800


                           MICROFINANCIAL INCORPORATED
                 - Company Continues To Reduce Debt Obligation -



Woburn,  MA--  September  2,  2004--  MicroFinancial   Incorporated   (NYSE-MFI)
announced  today  that the  company  continues  to reduce its  outstanding  debt
obligations. On September 1, 2004, the Company repaid approximately $5.6 million
of outstanding debt on its senior credit facility.

As of  September  2, 2004,  the senior  credit  facility  debt balance was $11.0
million, as compared to an expected $14.6 million for the same period, as stated
in the bank agreement.  In addition,  the  securitized  debt obligation has been
paid in full.

Richard Latour,  President and Chief Executive  Officer stated,  "We continue to
surpass our required  repayments and other  financial  expectations  of our bank
agreement.  This  includes  surpassing  our  lender's  target  debt  balance  by
approximately  $3.6  million  through  September  2, 2004 and reducing our total
interest bearing debt year to date by approximately $47.6 million."

About Microfinancial

MicroFinancial  Inc. (NYSE:  MFI),  headquartered in Woburn,  MA, is a financial
intermediary  specializing  in leasing and financing for products in the $500 to
$10,000 range. The company has been in operation since 1986.


Statements  in this release that are not  historical  facts 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,  " and similar  expressions  are intended to
identify  forward-looking  statements.  The  Company  cautions  that a number of
important  factors could cause actual  results to differ  materially  from those
expressed in any forward-looking statements made by or on behalf of the Company.
Readers should not place undue  reliance on  forward-looking  statements,  which
reflect the management's view only as of the date hereof. The Company undertakes
no obligation  to publicly  revise these  forward-looking  statements to reflect
subsequent  events or  circumstances.  The Company cannot assure that it will be
able to anticipate or respond timely to changes which could adversely affect its
operating  results in one or more fiscal quarters.  Results of operations in any
past period  should not be  considered  indicative  of results to be expected in
future periods.  Fluctuations in operating results may result in fluctuations in
the price of the Company's common stock. For a more complete  description of the
prominent risks and uncertainties  inherent in the Company's  business,  see the
risk factors described in documents the Company files from time to time with the
Securities and Exchange Commission.