Last Updated on
February 25, 2025
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ExcedrWith inflation near its highest levels since the early 1980s, managing costs has become more challenging for businesses. The Federal Reserve has raised its benchmark interest rate multiple times since March 2022 to curb inflation, with the federal funds rate currently at 5.00% to 5.25%. This increase marks the highest rate since October 2000 and is likely to continue as inflation remains a concern.
But how do inflation and rising interest rates affect equipment financing? As borrowing costs rise, businesses in industries reliant on equipment—such as life sciences and healthcare—face added challenges in managing cash flow, as equipment costs are substantial even without inflation.
The good news is that while the current environment is challenging, there are ways to manage these impacts. From locking in rates to exploring leasing options, smart companies can navigate rising costs and position themselves for continued growth.
Rising interest rates may make business owners hesitant to finance new equipment. However, securing critical items like lab equipment, medical devices, or production machinery is still essential for many. Higher rates increase borrowing costs and can lead to sticker shock as prices rise alongside inflation. This raises an important question:
Is it possible to continue financing equipment without straining cash flow?
Let’s look at a few strategies that can help businesses continue to acquire the equipment they need while managing costs strategically.
To navigate rising interest rates and secure essential equipment, consider these strategies. Each can help business owners manage cash flow and make the most of equipment financing options in today’s high-rate environment:
In times of inflation, leasing provides a flexible, cost-effective solution for businesses to acquire essential equipment without large upfront investments. Here are some of the ways leasing can help manage expenses when interest rates and prices are on the rise:
Additionally, certain leases qualify for low-value or short-term exemptions, enabling companies to take full deductions in the profit and loss statement. This exemption is useful for small business owners who may be leasing multiple lower-cost assets, such as lab or office equipment. Evaluating these tax benefits can help minimize taxable income and improve cash flow. With rising interest rates and supply chain challenges, securing funding quickly is essential. Leasing companies bring expertise in equipment financing and often work directly with equipment suppliers, streamlining the financing process. This can be particularly helpful in healthcare and biotech, where timely equipment access is crucial for ongoing research and development.
While leasing has significant advantages, especially during times of high inflation and rising interest rates, it’s important to evaluate all equipment financing options. Each financial service—from rentals and leases to ownership and lease-to-own arrangements—has its own benefits depending on a company’s specific needs and goals.
For example, short-term rentals offer flexibility, making them ideal for temporary projects or seasonal demands. However, they may not be the most cost-effective solution for long-term equipment needs. If a business requires specialized lab equipment or medical devices for an extended period, leasing or purchasing may be a better investment. Owning the equipment can also provide tax benefits, as depreciation and interest on an equipment loan are generally tax deductible.
Consider these factors when comparing financing solutions:
Evaluating these factors will help business owners choose a financing structure that aligns with their financial situation, type of equipment needed, and long-term goals. In uncertain economic times, carefully weighing the pros and cons of each option can support informed decision-making, ensuring the best fit for your business’s needs.
In an economic environment of rising interest rates and inflation, keeping costs fixed is essential for maintaining financial stability. Fixed-rate payments and stable expenses help companies in cash flow management, enabling them to plan more effectively despite fluctuating market conditions.
For industries like life sciences and biotech, where laboratory equipment and specialized tools are critical, managing equipment financing strategically can make all the difference. Through effective cost management and smart financing, companies can maintain stability and continue to invest in their essential equipment needs, supporting long-term growth.
If you’re looking for ways to manage rising interest rates and stabilize costs, equipment leasing can be an effective strategy. Leasing equipment provides businesses with a reliable solution for stabilizing costs. By securing fixed-rate lease payments, companies can protect themselves from inflationary pressures and rising borrowing costs. As inflation progresses, these payments become “cheaper” in real terms, allowing businesses to preserve resources for other important expenditures.
At Excedr, we provide leasing options specifically designed to support biotech, life sciences, and healthcare companies in acquiring the equipment they need. From laboratory devices to medical equipment, our leasing solutions help you maintain control over your costs while keeping pace with advancements in your field. Get in touch with us today to learn how our leasing services can help you meet your research and development goals—without the challenges of unpredictable financing costs.