Investing in the current climate

Finance and equipment leasing specialist, Alex Hall of Shire Leasing, shares his industry expertise on the current climate and how to invest in capital equipment affordably through economic uncertainty.

With inflation on the rise, interest rates at their highest in 14 years, and falling consumer demand, businesses are finding it increasingly challenging to invest in new equipment while maintaining healthy cash reserves. However, there is a solution that can help businesses invest in the equipment they need while preserving their cash flow ­­- asset finance.

In 2022, asset finance new business grew by 6% to £33.8bn, which was only 5% lower than the pre-pandemic peak in 2019. This growth can be attributed to the many benefits that come with asset finance, such as the ability to afford the best possible equipment, distributable costs and pay as you use, improved cash flow, and the benefit from fixed payments and fixed interest. Many businesses can also take advantage with associated tax benefits that come with asset finance, making it an attractive option for those looking to invest in new equipment affordably.

Three reasons why SMEs want finance

Cash flow

One of the key differentiators between cash and finance is the impact on cash flow. Purchasing equipment by paying the full sum upfront will immediately impact cash reserves. In times of uncertainty, it can be valuable to keep cash for unexpected emergencies. By using asset finance, businesses can preserve cash by spreading the cost over an agreed term, enabling a healthier cash flow as they pay while they earn.

Innovation

Another benefit of asset finance is innovation. Regardless of the situation post-recession, most business equipment tends to depreciate in value and effectiveness. Purchasing outright puts the risk of obsolescence on your business. Leasing allows you to pay for equipment that you use over its useful lifespan, set to a term that aligns with your business growth plans and requirements.

Certainty

Certainty is a significant factor when it comes to investing in capital equipment. The effect of worldwide factors, such as the Ukraine war, has resulted in supply chain issues and prolonged lead times. Cash purchases often require upfront payment, even though deliveries could be delayed for months. In contrast, asset finance can help hedge against inflation. Finance lease rental payments, for example, including interest, are fixed for the duration of the term, allowing you to lock in today’s rates. Furthermore, for a traditional finance lease, you don’t have to pay your first rental until the asset is delivered/installed on your premises.

The availability of finance is strong in many industries, such as gyms who often use it as strategy to maintain a leading-edge without the large initial lay. Now, the print and embroidery industry is also awakening to it, with funders like Shire Leasing working alongside key equipment suppliers to offer business customers a flexible finance option at point of sale.

Asset finance solutions can be used to fund a range of equipment including embroidery machines, DTF and DTG printers, screen printers, digital cutters, laser etching machines etc. Since introducing finance options on their range of business equipment, AJS Embroidery Services has grown their sales by 21%.

When asked to comment on offering finance solutions with Shire Leasing, Tony Dorsey, said: “Since moving our finance facilities to Shire Leasing, we’ve seen an increase in customer satisfaction, quicker turnaround times on deals and the majority of customers are commenting on the refreshingly helpful attitude of our account manager.

“We’re happy to recommend Shire to anyone who wants to increase their sales by offering finance.”

Asset finance is an attractive option for businesses looking to invest in capital equipment in the current economic climate. Funders like Shire Leasing can support businesses looking to invest directly, and industry alliances are allowing flexible finance options to become more prominent at point of sale too.

Contact Alex Hall on 07553 247 737 to learn more about finance solutions available to support your business growth.