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                                                                   EXHIBIT 10.13

                               SECOND AMENDMENT TO
                               SERVICING AGREEMENT

         This Second Amendment to Servicing Agreement, dated as of October 14,
2002 (this "Amendment"), is among MicroFinancial Incorporated, a Massachusetts
corporation, as Servicer (the "Servicer"), MFI Finance Corp. I, a Massachusetts
corporation, as Issuer (the "Issuer"), and Wells Fargo Bank Minnesota, National
Association, a national banking association (successor to Norwest Bank
Minnesota, National Association, "Wells Fargo"), as Indenture Trustee (in such
capacity, the "Indenture Trustee") and as Back-up Servicer (in such capacity,
the "Back-up Servicer").

         WHEREAS, the parties hereto are parties to the Servicing Agreement,
dated as of March 1, 2000 (as amended, restated, or supplemented from time to
time, the "Servicing Agreement"), which has previously been amended by the First
Amendment to Servicing Agreement, dated as of September 1, 2001, among the
parties to the Servicing Agreement;

         WHEREAS, Ambac Assurance Corporation (the "Note Insurer") is currently
the "Controlling Party" as defined in the Amended and Restated Indenture, dated
as of September 1, 2001 (as amended, restated, or supplemented from time to
time, the "Indenture");

         WHEREAS, Section 8.02(b) of the Servicing Agreement permits the parties
to the Servicing Agreement to amend the Servicing Agreement to add any
provisions to or change in any manner or eliminate any of the provisions of the
Servicing Agreement, with the consent of the Controlling Party, but without
requiring the consent of the noteholders under the Indenture, so long as such
amendment does not modify the provisions of the Servicing Agreement or the
Indenture specified in such Section;

         WHEREAS, pursuant to a letter agreement dated as of October 14, 2002,
the Note Insurer, as the Controlling Party under the Transaction Documents, has
waived and instructed the Indenture Trustee to waive, certain Servicer Events of
Default and Trigger Events described therein;

         WHEREAS, the Note Insurer has requested that the Servicing Agreement be
amended as provided for herein as a condition to making permanent such waivers;
and

         WHEREAS, the parties hereto have determined that the amendments
provided for herein are of a type permitted by Section 8.02(b) of the Servicing
Agreement without requiring the consent of the Noteholders.

         NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.        DEFINITIONS.

         Each capitalized term used and not otherwise defined herein has the
meaning ascribed thereto in the Servicing Agreement.

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SECTION 2.        AMENDMENTS TO SERVICING AGREEMENT.

         (a)      Effective as of the date hereof, the remittance procedure
contained in the Servicing Agreement is amended as follows:

                  (1)      Section 1.01 of the Servicing Agreement is amended to
                           contain the following additional definitions, in
                           appropriate alphabetical order:

                           "ACH Effective Date":  December 13, 2002.

                           "Lockbox": A post office box or other box capable of
                           receiving payments with respect to the Contracts that
                           have been mailed in by the applicable Customers.

                           "Lockbox Effective Date":  November 22, 2002.

                  (2)      Section 3.03(a) of the Servicing Agreement is amended
                           to contain the following phrase immediately before
                           the first words thereof, and the word "The" that
                           previously existed at the beginning of the sentence
                           is changed to "the":

                           "Except as otherwise provided in Section 3.03(b) and
                           Section 3.03(c) below,"

                  (3)      Section 3.03(b) of the Servicing Agreement is amended
                           to read in its entirety as follows:

                                    "(b)     (i) On or before the ACH Effective
                           Date, the Servicer shall open an ACH Account in the
                           name of the Issuer and cause the ACH Bank to enter
                           into a Blocked Account Agreement with the Indenture
                           Trustee substantially in the form attached hereto as
                           Exhibit C. Thereafter, the Servicer shall cause all
                           ACH debits that are made with respect to the
                           Contracts to be made to the ACH Account and shall
                           cause all amounts on deposit in the ACH Account with
                           respect to the Receivables (less a reasonable reserve
                           to cover checks and ACHs that do not clear and fees
                           and expenses of the ACH Bank for maintaining the ACH
                           Account) to be transferred to the Indenture Trustee
                           for deposit to the Collection Account (or as
                           otherwise provided in the Indenture) at least once
                           per week.

                                    (ii)     On or before the Lockbox Effective
                           Date, the Servicer shall arrange for a Lockbox to be
                           opened in the name of Wells Fargo Bank Minnesota,
                           National Association, as indenture trustee for MFI I
                           (or a similar designation acceptable to the Indenture
                           Trustee) and shall keep one key thereto for itself
                           and shall give one key thereto to the Indenture
                           Trustee. By no later than the Lockbox Effective Date,
                           all invoices that the Servicer provides to Customers
                           not making payments via ACH shall specify the Lockbox
                           as the address for remittances by such Customers.
                           Thereafter, on each Business Day, the Servicer shall
                           remove the contents of the Lockbox and inventory and
                           process the payments so received in the Electronic
                           Ledger and keep such checks and money orders
                           segregated from other checks and money orders it
                           receives. All such checks and money orders removed
                           from the Lockbox shall be deposited into the ACH
                           Account within three Business Days of such removal."

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                  (4)      Section 3.03(c) of the Servicing Agreement is amended
                           to read in its entirety as follows:

                                    "(c)     Upon termination of the initial
                           Servicer pursuant to Section 6.01(b):

                                             (i)      the initial Servicer shall
                                    immediately return its key for the Lockbox
                                    to the Indenture Trustee or its designee;

                                             (ii)     the Indenture Trustee
                                    shall (A) terminate the outgoing Servicer's
                                    access to the Lockbox, (B) deliver or cause
                                    to be delivered to the successor Servicer
                                    such key, (C) direct the successor Servicer
                                    to deposit all checks removed from the
                                    Lockbox to the ACH Account described above
                                    or to another ACH Account designated by the
                                    Indenture Trustee, and (D) deliver written
                                    notice in accordance with the Blocked
                                    Account Agreement to the ACH Bank
                                    instructing the ACH Bank of the replacement
                                    of the Servicer under such agreement and
                                    termination of all authority of the initial
                                    Servicer with respect thereto. In addition,
                                    the initial Servicer agrees that upon any
                                    such termination, it shall cooperate in
                                    arranging, at the request of the Controlling
                                    Party, for daily sweeps of any collections
                                    on the Receivables that are or become
                                    deposited into the Operating Account; and

                                             (iii)    the successor Servicer
                                    may, but shall not be required to, open a
                                    new Lockbox and a new ACH Account, and the
                                    Indenture Trustee and the successor Servicer
                                    may make arrangements for forwarding all
                                    mail received in the original Lockbox to the
                                    new Lockbox and deposit of any funds
                                    received in the new Lockbox to the new ACH
                                    Account using procedures similar to those
                                    described in Section 3.03(b)(ii)."

                  (5)      The Servicing Agreement is amended so that Exhibit C
                           to the Servicing Agreement is replaced by Exhibit A
                           to this Amendment.

         (b)      Additional Reporting Requirements. Article 4 of the Servicing
Agreement is hereby amended to contain a new Section which shall follow Section
4.06, which shall read in its entirety as follows:

         "SECTION 4.07     ADDITIONAL REPORTS TO NOTE INSURER.

         For so long as MicroFinancial Incorporated is Servicer, until such time
as the Note Insurer may otherwise direct the Servicer in writing (and the
Servicer shall provide a copy of any such notice of termination of such
obligations to the Indenture Trustee and the Issuer), the Servicer shall deliver
to the Note Insurer (with a copy to the Indenture Trustee and the Issuer):

         (a)      on each Tuesday (or if such day is not a Business Day, the
next succeeding Business Day), commencing on December 3, 2002, a report
indicating:

                  (i)      the amount of cash deposited to the Operating Account
         or the ACH Account, as

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         applicable, during the previous week, and separately identifying cash
         in such account that is (A) associated with collections on Contract
         Assets constituting Collateral under the Indenture, and (B) not
         associated with such collections; and

                  (ii)     the amounts that were actually swept into the
         Collection Account from each of the ACH Account (which may indicate
         that a specified reasonable reserve has been retained in the ACH
         Account as referenced in Section 3.03(b)), the Operating Account, and
         any direct deposits directly made to the Collection Account;

         (b)      within five Business Days after each Payment Date:

                  (i)      an updated projection for the next and subsequent
                           Payment Dates of the amount of principal and interest
                           payments on the Class A Notes to be made until and
                           including the date on which Class A Notes are
                           projected to be paid in full; and

                  (ii)     an overview of variances between actual vs.
                           previously projected payments on the Class A Notes;
                           and

         (c)      within 20 days after the end of each calendar month:

                  (i)      unaudited consolidated financial statements of
                           MicroFinancial Incorporated and its subsidiaries as
                           at the end of and for the calendar month then most
                           recently ended, consisting of a balance sheet, income
                           statement, and statement of cash flow; and

                  (ii)     cash flow projections for the next calendar month,
                           showing projected (A) payments on the Class A Notes,
                           the Class B Notes, and the notes issued by MFI
                           Finance II, LLC, (B) other scheduled debt expense,
                           and (C) operating expense; and

                  (iii)    an aging of accounts receivable that are Collateral
                           under the Indenture."

SECTION 3.        REPRESENTATIONS AND WARRANTIES.

         Each party by executing this Amendment hereby represents and warrants
that the person executing this Amendment on behalf of such party is duly
authorized to do so, such party has full right and authority to enter into this
Amendment and to consummate the transaction described in this Amendment, and
this Amendment constitutes the valid and legally binding obligation of such
party and is enforceable against such party in accordance with its terms.

SECTION 4.        MISCELLANEOUS.

         (a)      Ratification of Servicing Agreement. The terms and provisions
set forth in this Amendment shall modify and supersede all inconsistent terms
and provisions set forth in the Servicing Agreement and, except as expressly
modified and superseded by this Amendment, the Servicing Agreement is ratified
and confirmed in all respects and shall continue in full force and effect.

         (b)      References. The Servicing Agreement and any and all other
agreements, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms

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of the Servicing Agreement as amended hereby, are hereby amended so that any
reference in such agreements to the Servicing Agreement shall mean a reference
to the Servicing Agreement as amended hereby, mutatis mutandis.

         (c)      Counterparts. This Amendment may be executed in two or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment by telecopier shall by as
effective as delivery of a manually executed counterpart of this Agreement.

         (d)      Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the application of choice of law principles of any jurisdiction.

         (e)      Binding Agreement. This Amendment shall be binding upon and
inure to the benefit of the Issuer, the Servicer, the Indenture Trustee, the
Back-up Servicer, the Note Insurer, and the Noteholders and their respective
successors and permitted assigns.

         (f)      Notice to Rating Agencies. Promptly after the execution of
this Amendment, the Servicer shall mail a copy of this executed Amendment to the
Rating Agencies, the Indenture Trustee, the Note Insurer and each Noteholder.

                                    * * * * *

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         IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Servicing Agreement to be executed and delivered by their
respective officers thereunto duly authorized as of the date first above
written.

                                             MFI FINANCE CORP. I, as Issuer

                                             By: /S/ Richard F. Latour
                                                 ---------------------------

                                             Name: Richard F. Latour

                                             Title: Treasurer

                                             MICROFINANCIAL INCORPORATED, as
                                             Servicer

                                             By: /S/ James R. Jackson

                                                 -------------------------------

                                             Name: James R. Jackson

                                             Title: CFO

                                             WELLS FARGO BANK MINNESOTA,
                                             NATIONAL ASSOCIATION, as Indenture
                                             Trustee and as Back-up Servicer

                                             By: /S/ Cheryl Zimmerman
                                                 -------------------------------

                                             Name: Cheryl Zimmerman

                                             Title: Corporate Trust Officer

CONSENTED TO BY:

AMBAC ASSURANCE CORPORATION

By: /S/ Harris C. Mehos
    ---------------------
    Name: Harris C. Mehos
    Title: First Vice President