Interest rates are up, and more than a few businesses are adjusting their plans because of them. But taking a step back and looking at the big picture can provide you with important context before making decisions that have the potential to affect your long-term growth.
Consider this: the last time interest rates and costs were elevated to this degree, most of today’s business leaders were still in grade school. When you compare the very low rates of the past 20 years or so with rates now, it’s easy to understand why more than 60% of small- and mid-sized companies put plans for new and upgraded equipment on the shelf in 2023.
But when you widen your view beyond just two decades that can arguably be considered outliers, our current rate levels look much more normal. Looking at rate trends over the last 50 years, rates now are at relatively competitive levels.
Regardless, companies 50 years ago were able to invest in growth confidently. And that’s not too surprising for two reasons:
- The alternative to investing in growth is not just standing still – it’s falling behind
- Rates rose for everyone, maintaining a level, though elevated, playing field
While no one enjoys an increased cost of capital, it’s part of the normal ebb and flow of the economic cycle.
Don’t let higher rates keep you from investing in new equipment or technology. Here are seven reasons why:
- Increased efficiency and productivity: By investing in modern machinery, tools, and technology, businesses can streamline operations, reduce labor costs, and accomplish more in less time.
- Improved quality and greater innovation: Newer equipment may offer enhanced features, precision, and reliability, allowing businesses to meet customer demands more effectively and stay competitive in the market. Moreover, equipment and technology investments can lead to the development of new products or services, opening up additional revenue streams.
- Cost savings in the long run: Modern equipment is often more energy-efficient, requires less maintenance, and has lower operating costs compared to outdated or inefficient machinery. Therefore, despite higher interest rates, the long-term savings and benefits realized from improved equipment can outweigh the initial financing costs.
- Capacity expansion and scalability: Investing in new equipment can enable businesses to expand their production capacity and scale operations to meet growing demand. Whether a business is looking to increase output, diversify product offerings, or enter new markets, having the right equipment in place is essential for pursuing growth opportunities and maximizing revenue potential.
- Maintaining competitiveness: Outdated equipment can hinder a business’s ability to innovate, adapt to changing market demands, and deliver superior products or services. By investing in new equipment, businesses can position themselves as industry leaders and attract customers who value quality and efficiency.
- Tax benefits and incentives: Depending on the location and industry, there may be tax incentives or deductions available for businesses that invest in new equipment. These incentives can help offset the initial costs of purchasing or leasing equipment, making it more affordable for businesses to upgrade their assets.
- Enhanced financing options: Despite higher interest rates, businesses have access to various financing options tailored to equipment purchases, with flexibility that can exceed that offered by traditional lenders. Some equipment suppliers may offer unique finance solutions that enhance the affordability of a new investment.
Investing in new equipment, even when faced with higher interest rates, is essential to drive growth, increase efficiency, maintain competitiveness, and seize opportunities in the market.
If you’re interested in new equipment and technology but want better control of the impact it can have on cash flow and budgets, LEAF can help. For decades, we’ve worked with businesses like yours to develop customized, affordable finance options that help them invest in growth with confidence.
