Cash flow is the lifeblood of a typical UK SME, and preserving it whilst still growing is critical to success. Even firms that make a profit can irreversibly stall if liquidity levels aren’t where they need to be. Liquidity in seasonal sectors, such as retail, agriculture, and tourism, is significant, with businesses in these areas often feeling the pinch during off-peak months.
Growth-focused SMEs in these industries often feel this pinch even more because their cash is tied up in equipment and limiting their ability to invest in other areas of their business that will stimulate growth, be it people or marketing. Leasing has long been a way for businesses to protect cash reserves and still benefit from the assets they need to grow.
Here, we’ll be exploring why leasing with Shire is an ideal alternative to traditional purchases or loans.
Why not give Shire a call today if equipment leasing is something you want to benefit from right away?
Cash flow pressures are just one of many headaches a SME has to deal with, but fortunately, it need not stick around. Modern equipment leasing provides an effective solution by spreading the cost of equipment over predictable monthly payments. So instead of paying thousands of pounds up front on an asset, payments for it can align with your income cycles.
This turns assets into expenses like heating and staffing costs rather than investments that could hamper your business until they start to generate revenue from their use. The net result is that your cash reserves remain intact and can be used to invest in areas of the business that will increase growth and productivity. Hiring new talent or investing in marketing are just two areas where existing cash reserves can be better spent, and their benefits more immediately felt. Leasing also prevents SMEs from the risks of asset depreciation.
Take a fleet of vehicles, for example. The more they are used, the more their value decreases, which makes reselling them to upgrade to a newer fleet harder to justify because you may not get what you paid for them back. This leaves you with a fleet of vehicles which aren’t particularly valuable and aren’t as efficient as they once were, costing you money.
SMEs can remain nimble by opting for a lease agreement that is flexible and works for them. Its inherent scalability means businesses can simply add equipment to their agreement as and when they need to, without chipping away at those all-important cash reserves.
The other two alternatives to leasing are:
● Outright cash purchases give you immediate ownership of an asset but drain your cash reserves.
● Traditional loans provide access to capital to buy an asset, but there is often greater interest because the security of the loan is sometimes against your business.
Leasing sits in the middle of these. It gives you immediate access to equipment like a cash purchase without draining your cash reserves, and like a traditional loan, you make repayments, but because these are held against the asset itself, SMEs often don’t need a long history of repayments to qualify.
You can also avoid the long-term debt commitments that are common with traditional bank loans. Putting your cash into owning assets turns it into dead money that doesn’t work to grow your business when you compare it to investments in people, R&D, and marketing.
The leasing model, such as the one offered at Shire, reflects modern business needs, allowing you to budget more effectively with fixed repayments. Speak to Shire today if you want to keep more of your cash to spend elsewhere and still access the newest equipment.
Leasing acts as a buffer for many businesses, protecting against unexpected costs or late payments. The predictable monthly payments keep cash aside for those ‘rainy day’ incidents. Here are a few other examples of how leasing keeps businesses in various industries financially stable.
Construction
A firm needs to upgrade its machinery to meet new ESG regulations, but rather than paying a six-figure fee to own this machinery outright, it opts to lease and preserve cash for hiring new talent.
Retailers
Shops and stores opt to use leasing to upgrade points of sale and other in-store tech rather than using their peak-season profits to pay for it. When the time comes to upgrade again, they can use the lease agreement to access even newer assets at a time that suits them.
Logistics
Firms that need modern fleets, which are fuel-efficient and not constantly needing repair, can opt for a leasing agreement that ensures they’re not burdened with outdated vehicles that don’t retain their value.
Tech
A start-up business in the tech industry can take advantage of lease agreements to access all the latest servers and software needed to scale its business without burning through hard-earned investor funds. Businesses, no matter the sector, can pivot faster and seize new opportunities because they have the working capital needed to grow their business at hand, not tied up in assets.
Shire knows the importance of preserving cash flow, which is why we tailor our leasing to match seasonal revenue flows to ensure businesses only ever feel the benefits of this modern finance model. Our flexible terms are designed around your business needs, not some archaic banking model, and will give you the confidence to spend your cash flow in more effective ways.
You also gain access to a wide supplier network that offers the latest equipment that can be installed in your business and put to work immediately. We’ve helped UK SMEs across all actors preserve their liquidity in the 30+ years we’ve been operating.
Thanks to our rapid approval process (we can offer automated finance decisions in less than six seconds), we ensure businesses never miss out on an opportunity to access assets and scale their business.
The ability to act without draining reserves is a competitive advantage for many UK SMEs. Those with a healthy cash flow can reinvest and innovate far quicker than those still relying on expensive bank loans or outright purchases.
Not only does it provide you with assets, but it also steels you against downturns and market shocks. Shire’s financial specialists know the ins and outs of asset finance as a way to preserve cash flow and will be on hand to give you options to help you grow and protect what you’ve earned to invest.
If you’re ready to explore how leasing could strengthen your cash flow, speak to Shire’s finance specialists today.