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Machinery and Equipment Financing Is Forecasted to Grow in 2021

To remain relevant and profitable in 2020, businesses had to change key features of their operations. Even online giant, Amazon, needed massive restructuring to meet new demands brought on by the pandemic. The greater need for successful pivoting required businesses to invest in new equipment and machinery, which fueled steady equipment financing growth. Economists and professionals in financial spaces believe this trend will continue for 2021.

The Recovery of the Manufacturing Industry

Manufacturing once served as the foundation of the American economy. Manufacturing jobs kept Americans employed and fueled economic growth since the initial days of industrialization. However, countries with cheaper labor forces began to undercut the American manufacturing market. This prompted even local companies to move manufacturing overseas and import goods.

In 2019, increased nationalism in America and conservative policies gave manufacturing the boost it needed to begin its recovery. Despite the effects of the pandemic, manufacturing continued to grow. The Equipment Leasing and Finance Foundation confirms that the industry’s recovery continued throughout 2020.

This stemmed, in part, from the increased demand for particular goods in response to the pandemic. Consumers needed everything from more disinfecting wipes to more recreational vehicles to travel safely. The shipment rates of some goods climbed to record levels.

Economists foresee this also continuing into 2021. The Equipment Leasing & Finance Foundation (ELFF) predicts a 4.7% growth in equipment and software financing for 2021.

The Importance of Equipment and Machinery Financing

Changing the course of a business requires more than creativity and capital. It requires physical machinery and reliable software to build private infrastructure that can facilitate change. The specific needs vary from business to business, but there are some common needs businesses addressed:

  • Office equipment for administrative staff working from home
  • Faster servers and cloud computing software to handle increased online offerings
  • Delivery vans, trucks, and other vehicles to fill gaps in logistics
  • Factory equipment to expand production levels
  • Physical robots or online bots to respond to increased demand
  • Better equipment to improve turnaround time in-house

Companies that relied on financing to meet these and other needs did not necessarily do so because they had no cash on hand. Instead, smart business owners recognized that a volatile economy facing constant restriction changes is not an adequate space for running the risk of running out of cash.

Therefore, business owners could finance these big investments and still hold on to capital to pay bills and keep employees on the payroll. The money also provided a healthy cushion when even factories and manufacturing plants had to shut down. Notable examples include Tesla and RV manufacturing plants.

The Move To Capitalize on Financing Trends

After observing these trends from the sidelines, risk-averse companies now feel better about borrowing. So, what can owners of these businesses do to ensure they don’t miss out on the action for another year?

Review Finances

There isn’t a single business in existence that couldn’t use more capital to expand. However, borrowed money comes at a cost. These business owners must complete a thorough review of business finances, goals, and missions before deciding the range they prefer to borrow.

Build Credit-Worthiness

When traditional lenders clutched their purse strings in 2020, online lenders stepped up to the plate to support small and medium-sized businesses. These lenders often use far more flexible criteria for lending money. Even so, the more credit-worthy a company and its owners are the more and better options that become available to them.

Here are some easy ways to work on credit-worthiness:

  • Ensure existing personal and business loans are in good standing.
  • Improve personal credit score and finances.
  • Review and improve cash flow management of the business.
  • Prepare financial documents ahead of time for review.
  • Consider grants and other financial options to help fill the gaps and borrow less money.

Choose Wisely

Business owners need more than a lender. They need financial allies who want to see them succeed as much as they do. These allies view the business’s success as its own success and help facilitate milestone achievements.

At LQD Business Finance, our clients consider us true partners in their recovery and growth process for the year behind us and the year ahead. We are eager to see you and your business succeed and provide financial solutions that make this possible.

We offer fair and competitive loan terms with your business’s best interest in mind. Learn more about machinery and equipment financing at LQD Finance.

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