One of the main reasons that businesses of all sizes fail is the rather unglamourous lack of working capital. Many would think it would be down to low sales, lack of product innovation or even recruitment, and whilst these can all be contributing factors without sufficient cash a business’ days are numbered. With the current economic climate posing several challenges for small and large businesses alike, cashflow has never been so important and asset finance is a great way to preserve this, protecting your business.
Asset finance is a really accessible way to obtain the equipment you need or want for your business, without precious working capital being tied up. Rather than having to part with thousands of pounds in one go, leaving a working capital whole, utilise a regular fixed payment. Not only does this protect your cash reserves but is also means that you benefit from an immediate return on investment.
By not tying up cashflow in equipment this can be used in ways to work harder for the business such as:
- Paying for a salesperson or marketing campaign
- Ability to buy larger volumes of raw material benefitting from economy of scale
- Allowing prompt payment of suppliers’ invoices meaning potential discounts
- Earning from a high interest savings account
You may even be able to “afford” to pay outright for the equipment, but unless you can also afford take up opportunities such as the above, paying for the equipment may be costing you in lost opportunities!
The most prudent business owners will ensure they have a sufficient buffer to weather any storm. Whilst some might deem this unnecessary, COVID was a brilliant (or terrible!) example of how hugely buoyant businesses could collapse overnight without this. Unprecedented events like COVID are exactly the reason, that having a slush fund for a rainy day is essential to long term business survival and asset finance is a cost-effective way to do this.
Of course, asset finance is not the only way to fund your equipment, but it is definitely the most sensible. You may be offered loans or similar products, which would get you the equipment you need without denting your cashflow. These are however often at higher rates and it is best to save these for when you really need them for working capital requirements.
Protecting your business is now more critical than ever, so don’t leave the longevity of your business to chance, but instead build a buffer and help your business to take up opportunities that will make you grow.