All the Right Moves: Financing in Today’s Economic Climate

In an environment marked by unpredictable conditions on both the national and global front, it’s natural to preserve access to liquidity. Holding onto cash in these conditions can feel reassuring. It serves as a safety net to cover unexpected expenses, providing a sense of control. But holding exceess cash can also prevent you from growing and building, and make you pause on opportunities that could significantly move your business forward.

Finding the right balance between holding cash, using cash for expenditures, and financing is a nuanced effort. Most importantly, financing can play a key role in that balance, helping businesses maintain smooth operations and preserve cash at the same time.

Individualized, tailored financing

Financing often takes the form of conventional, standard programs that are intended to suit the masses. But a one-size-fits-all approach is not optimal nor realistic, particularly in the current market. Rather, implementing a customized solution tailored to your business, your business model and your objectives will open a pathway to resiliency and growth.

We’ve spent a half century developing customized solutions to help our clients create long-term, sustainable business growth – through all types of economies and economic cycles. We believe that an interest rate is good for a single transaction, but solid expertise and long-term relationships are good for the life of a business. So we take the time and get to know our customers’ needs, goals and business models – and then create innovative financial solutions that drive sales and help them use assets wisely. 

Creative programs, innovative use

While every business and every situation is different, below are a few examples of the types of innovative financing programs we find advantageous in today’s environment. Tailored, flexible programs – and innovative use of those programs – can defuse cash-flow anxiety and give companies the resources they need to find a way forward. 

• Lease versus buy. The decision to lease or buy may seem clear and obvious. Yet a host of factors – including tax ramifications, maintenance considerations and equipment obsolescence – can impact the decision over the short and long term. Our industry experts have deep experience to help businesses analyze their situation, and then create a customized program that works for them.
• Deferred-payment plans. Deferrals on principal and interest payments can help companies manage short-term cash flow and ramp up in a phased manner.
• Step-payment structures. This type of financing program, where payments scale with revenue, allows companies a graduating period to stabilize cash flow.
• Asset-based lending (ABL). Ideal for businesses with strong asset bases, ABL also works well for companies with fluctuating cash flow, strained profitability or credit challenges that prevent them from accessing other funding at competitive rates. This is because ABL looks at assets first – what a business has in hand right now – and then cash flow. ABL is an effective, efficient capital-efficiency solution. In effect, it monetizes balance sheet assets to increase liquidity. By putting those assets to work, ABL can help improve debt-to-equity and other financial metrics, which can, in turn, increase financial stability.
• Power purchase agreement (PPA). A PPA lets an energy buyer purchase electricity generated by a renewable energy system. The energy provider installs, owns and operates the system, while the buyer purchases the electricity produced by the system under terms of the agreement. A PPA can be an ideal way to finance a clean-energy project for a business that wants to avoid upfront costs of project development – and that does not want (or need) the asset on its balance sheet. Resulting utility savings can pay for the costs of the agreement over time.
• Equipment-as-a-service (EaaS) financing. Tying payments to equipment usage can be a smart move for companies that experience fluctuating demand. EaaS financing can also package usage-based billing for equipment with maintenance costs. In some cases, we can even offer a structure where we own the equipment assets and lease them back to customers. In that way, we assume the residual risk, ease the financial process and allow our customers to focus on their core competencies.

Moving forward as partners

Firms that adapt their financing strategies to changing economic conditions can increase resilience, reduce risks, improve financial health and position themselves for growth. Far from being limited to conventional programs, financing can be creative, innovative and individualized to every company. We’ve been working as partners invested in our customers’ long-term business strategy for decades. This decade, this year, this time is no different. Together, we can navigate the road ahead.