As economists predict that inflation in the UK will remain high throughout 2023 and potentially extend into 2024, businesses are struggling to navigate the financial challenges as a result of rising costs.
Inflation can have significant implications for businesses of any size and industry, affecting their profitability and growth. To offset high costs, many are being forced to extend the burden to their customers through price increases. The result of this is a dramatic drop in customer spending, leading to reduced sales.
If you are a business owner, the current economic climate may make it seem like an impossible time to affordably invest in new assets. However, asset finance offers a practical solution to ease the impact of inflation when investing while enabling you to access valuable equipment and maintain operational efficiency.
In this blog, we explore how asset finance can support businesses during these turbulent times.
The impact of inflation on businesses
As inflation rates increase, businesses are facing several challenges. The cost of acquiring essential equipment and machinery has increased, impacting their budgets, and limiting their growth prospects.
As the value of money decreases it also reduces the purchasing power of both businesses and consumers. This can to a significant drop in demand for goods and services, which can consequently hurt revenue streams.
Businesses are also experiencing high costs for raw materials, utilities, and labour, squeezing their profit margins.
How asset finance can enable businesses to invest in assets during inflation
There are many business benefits to utilising asset finance as inflation continues. Here are the 5 main benefits:
Safeguard cash flow
Asset finances offers a viable solution for businesses to ease the current challenges caused by inflation. Instead of purchasing expensive equipment and machinery outright, businesses can lease them for a specified time.
This allows businesses to safeguard capital and use it strategically instead, by avoiding large upfront expenses when buying equipment outright.
Fixed payments and predictability
Leased agreements typically involve fixed monthly payments which helps businesses to forecast and plan their budgets more effectively.
These fixed payments allow businesses to mitigate the impact of inflation, providing predictable costs over the lease term.
This can be invaluable during these uncertain economic times, as it helps businesses to accurately assess their finances.
Acquire state-of-the-art equipment
Asset finance provides businesses with access to state-of-the-art equipment without having to pay expensive upfront costs.
In the current climate, while prices continue to rise, leasing enables businesses to stay competitive and boosts their operation. By regularly upgrading leased equipment, businesses can adapt to ever-changing market dynamics without making significant investments in equipment that can become outdated or obsolete.
No rentals until delivery/installation
International supply chain issues caused by a number of macro factors has been one of the contributors to inflation, impacting not only prices, but also delivery lead times. One of the key advantages of Asset finance is that businesses only starts paying when the leased equipment is delivered and installed on-site. In comparison to outright purchases, where you may need to spend thousands upfront to secure the order before you even have the equipment on-site.
Asset finance can also benefit businesses through tax relief. In many business circumstances, finance lease rentals can be tax-deductible against profits, which can help to reduce the overall net cost of the investment.
Asset Finance from Shire Leasing
At Shire Leasing, we understand the mounting pressures that businesses are facing in today’s economic climate.
Whether you need to acquire state-of-the-art machinery or upgrade existing equipment, our Asset finance solutions are designed to support your business growth through these challenging times.
If you have any further questions about our leasing options, get in touch with our team today.