Five ways leasing can support company growth during a recession
In 2022, markets worldwide turned bearish, with indexes such as the S&P500 declining over 20 per cent from previous all-time highs. Central banks around the world continued to raise interest rates and inflation persisted, and market commentators expected a recession to begin in late 2023 or early 2024. Of course, no one can predict exactly when the markets and economy will enter a recession, but it’s important that companies are proactive in taking measures to manage capital and minimise the risk imposed by the current economic environment. Leasing assets not only helps companies manage their capital throughout a recession, but it provides other benefits too. Keep reading to learn about five ways leasing can support company growth during a recession.
Fixed interest in leasing arrangements provides financial stability
In an economic environment with persistent inflation and rising interest rates, keeping expenses as stable as possible can help companies to manage their capital effectively. With leasing, the interest rate is fixed for the entire term of the lease agreement, providing assurance that the interest expense on leased assets will remain stable as other inputs and financing arrangements potentially become more expensive.
Leasing frees up capital
Upgrading and replacing equipment requires a significant monetary investment if a business opts for capital expenditure. Similarly, a large upfront deposit is often required with traditional finance channels such as a bank loan. As supply chain disruptions continue and the economy remains challenging, companies should use asset leasing and finance solutions that free up capital and don’t require large upfront capital commitments. Not only do these options preserve working capital, but it also allows companies to ensure income produced from revenue-generating assets can cover ongoing lease payments.
Companies get access to the latest technology with leased equipment
Keeping assets and equipment updated at all times provides a range of benefits. It can provide sustainability improvements while also giving people the current technology to do their roles as efficiently as possible. Not only can this help companies to realise productivity gains, but giving people the latest technology can also help to attract and retain the best talent. According to research from Oracle, 88 per cent of workers say their meaning of success has changed, and that work-life balance and flexibility are top priorities. Giving people the best technology can help companies to deliver the flexible arrangements that people need to work when and where it suits them. Further, having the latest technology means that new systems and software runs more efficiently. In a world where business intelligence and data-driven insights are critical, the right technology can provide companies with a competitive edge.
Leasing can help companies attract and retain the best talent
Having the latest equipment helps people to realise efficiencies while enjoying a positive working environment. While this has arguably always been important to employees, it’s now critical with companies adopting a hybrid working model following COVID-19 and “the great resignation”. At a minimum, employees expect a fast and secure laptop and mobile phone or tablet (where applicable). Leasing makes this possible, so a company has access to the most current devices without sacrificing working capital.
Effective lease management systems provide real-time data insights for stronger decision-making
Strong and timely commercial decision-making is critical in a crisis or recession. With an effective lease management system in place, such as Quadrent’s lease accounting software (LOIS), to take stock of and manage leases, decision-makers can analyse their lease data to understand exactly what levers it has available to deleverage and ensure financial stability. Not only does this provide support for stronger decision-making, but decisions can be made faster when all of the necessary information is centrally available at all times. This is particularly important in a recession where a company may need to quickly revise and renegotiate financial arrangements.
Support your business growth and preserve working capital with Quadrent
The ability to make the right decisions quickly while keeping expenses fixed and working capital available are important factors for companies to control throughout a recession. By leasing company assets and equipment, people get access to the latest technology and equipment is used only at its most efficient point in its lifecycle. Further, by opting for solutions that fix interest rates for the life of the lease agreement, a company can stabilise some of its expenses and keep capital available for other investments or as a safety net.
Quadrent works with organisations helping them access assets without sacrificing cash flow and addressing their ESG risk in the process. With a team that has in-depth leasing knowledge and specialised accounting backgrounds, we’ll help your business to weather tough economic conditions, get the most value out of your assets and address growing ESG requirements and reporting expectations.
Proactively manage your cash flow in a challenging economic environment with Quadrent. Click here for more information.
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