Despite the fact that inflation is still a hot topic, businesses are investing in technology and equipment to keep up with demand. In more than a year, the Federal Reserve did not push interest rates higher, but it did state that additional rises are anticipated by year’s end unless further progress is achieved in reducing inflation.
Inflation can impact businesses in a couple of ways. First, if the cost of materials and labor expenses increase, businesses raise prices to preserve their margins. Second, the Federal Reserve will attempt to balance the equation by raising interest rates. Businesses with existing bank loans suddenly find they are paying more on their installments, while those in need of financing become hesitant to finance because of higher rates.
Inflation directly affects banks as well. When interest rates go up, retention becomes a challenge. With businesses seeking financing solutions that fall outside of traditional loans.
The best way to ease inflation worries is to evaluate reliable alternative lending programs available. Traditional banks do not offer programs small businesses need such as equipment leasing, working capital, and more. To find a middle ground, banks can expand their offerings by partnering with reputable indirect lenders that can provide solutions that fit what their clients are seeking.
Alternative equipment financing hedges inflation risk because instead of paying the total cost of equipment up front or with a large down payment in today’s dollars, the stream of payments delays the outlay of funds. In addition, either a lease or finance can provide fixed payments, the finance company absorbs the payment devaluation over time due to inflation and other financial risks.
In contrast to a bank or broker, Northland Capital is a direct alternative lender that provides lending services to connect customers with the equipment financing programs they need. Threats of a recession, further rate increases, and rising prices hang over the heads of companies across industries, leaving the U.S. economy full of unknowns. But instead of cutting back on capital investments, businesses have continued to invest in equipment in spite of these pressures.
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