On Thursday 11 May 2023, the Bank of England announced a 0.25% increase in its base rate from 4.25% to 4.50%, a 15-year high.
While rising interest rates may seem like a deterrent to investing and purchasing new equipment and commercial vehicles on finance, there are still several benefits to consider:
- Financing will allow your business to acquire the necessary equipment and vehicles you need immediately – This will enable you to start utilising the new asset right away, potentially boosting your productivity and revenue.
- Your business can preserve your working capital for other essential business operations, such as investing in new growth opportunities, a marketing campaign, or employing new staff.
- Maintaining your cashflow can provide more flexibility for everyday expenses.
- A fixed repayment structure will allow for better budgeting and financial planning for your business without the worry about fluctuations due to interest rate changes.
- Investing in new equipment will come with new advanced technology, which will not only improve your business’s operational efficiency, but also productivity and competitiveness in your market. The benefits gained from investing in new technology outweigh the impact of rising interest rates in the long run.
- Equipment and commercial vehicles can hold their value and even appreciate over time. This means that even if you are paying interest on the financing, the value of the assets may increase, potentially offsetting the cost of borrowing.
Cash can literally be the lifeline of your business so why not keep hold of it for when you really need it.
Things to be mindful of, non-payment could negatively affect the credit rating of the business and the guarantor and could result in the asset being re-possessed.
