3 Ways Leasing Can Help Companies Grow During an Economic Downturn

Managing economic uncertainty is an inherent part of running a business. Whether it’s responding to macroeconomic factors that may cause a recession or industry-specific challenges that present risk, leasing can help your company better manage its cash flow and grow during an economic downturn. And with leasing providers developing sophisticated offerings that provide peace of mind throughout the entire asset lifecycle, leasing assets can provide wider benefits, too, such as operational efficiencies and more detailed sustainability data.

Quadrent, in collaboration with SAR Accounting Advisory, recently hosted a webinar outlining how companies can master leasing strategies to boost cash flow and proactively manage a potential downturn. View the webinar recording here, and click here to read the summary. Keep reading below to learn how different leasing strategies can help a business grow during an economic downturn.

1. Diversify funding for your non-core assets

Banks typically reduce their lending capacity in times of economic uncertainty as central banks tighten monetary policy through interest rate rises and quantitative tightening. This leads to less capital flowing through the economy, which can make it challenging to secure business funding. Further, banks may seek additional security to maintain current funding facilities as risk appetites decrease.

Leasing can provide an alternative source of capital that is more aligned with your business’s specific asset-use needs. By leasing non-core and non-revenue generating assets (e.g. laptops, tablets, screens, meeting room equipment) your company can focus its financial and managerial resources and CAPEX on core operations and strategic initiatives. This allows companies to make sure staff still have access to the latest technology to drive productivity and growth, even during an economic downturn.

2. Cost outs and doing more with less are key

A cost out project can help reduce long-term costs by helping your business realise efficiencies through improving systems and processes. These projects typically require an initial financial outlay, but you can also take advantage of the benefits of a cost out with leasing. For example, assets such as new software as part of a cost out project can be leased. The benefits of these arrangements are two-fold. The business gains long-term cost efficiencies and reduces its CAPEX as the cost can be spread across the life of the lease term. This can allow future cash flows to pay for the ongoing lease costs.

3. Get a cash flow boost

Whether your organisation currently leases assets or it’s looking to unlock cash flow in existing owned assets (especially if you own excess assets you aren’t using), a range of leasing strategies can realise your objectives. If your company needs a cash flow boost, the sale and leaseback of assets can provide a cash injection, while transferring the ownership risk to the lessor.

Similarly, extending the lease term on assets already leased or investigating structured finance options that can allow your business to secure finance through future cash flows generated by your assets can diversify your funding. Not only does thecost of using an asset decrease when a lease term is extended, but using structured finance can help your organisation to collateralise a loan with other types of security often unavailable from banks. This provides more flexibility over how leasing and finance arrangements are structured, helping your company maintain and build cash reserves by reducing the need for upfront capital investments to buy assets or collateralise a loan.

How to drive value from leasing strategies

Finding the right leasing provider requires a thorough assessment of several important factors. The lessor should be able to manage as much of the asset lifecycle as possible and engage service providers that meet growing environmental, social and corporate governance (ESG) requirements. And beyond leasing the assets, having the option to implement systems that make lease accounting and compliance straightforward and effective while developing a centralised data source can drive stronger commercial decision-making.

Preserve working capital and grow your cash reserves with Quadrent

Capital preservation and building your cash reserves are critical in times of economic uncertainty. Leasing presents a strategic advantage by providing financial flexibility, cost efficiency, and the ability to optimise operational performance with your business’s assets. By leveraging a range of leasing strategies and selecting the right leasing provider, your business can proactively manage its cash flow, preserve capital, and position itself for growth, even in times of economic challenge.

Quadrent's asset financing and leasing solutions can help you unlock cash flow and grow, even in an economic downturn. Click here to contact our team for more information.