September 7, 2021 | Business insights
Even as Covid-19 infections caused by the delta variant continue to rise in some areas of the country, economic activity continues to increase. Consumer spending rose at an annualized rate of 11.8 percent in the second quarter, according to the U.S. Bureau of Economic Analysis. Payroll employment increased by 943,000 in July, according to the U.S. Bureau of Labor Statistics, above expectations.
The best news is that spending increases were led by food services and hospitality, some of the mainstays of local economies. Commercial enterprises are now seeking ways to grow as the economy expands, especially because interest rates remain at historic lows.
Leveraging financing is one way businesses can achieve growth. What is it and how does it work?
Leveraging is a popular concept in the business sector that refers to how businesses acquire new assets, either for expansion or for a startup. The process itself involves obtaining loans or other types of funding to help businesses pay for assets that will help them expand. In addition to borrowing money, businesses can also leverage via equity by seeking investors to raise money.
Leverage uses capital from loans or funds from investors to fund company development and growth. In general, leverage works well when a company’s revenues and profits are increasing. Leverage can spark growth.
As the economy recovers, many companies are in a good position to grow faster. And companies are taking advantage of historically low interest rates.
Demand for commercial and industrial loans is stronger, the Federal Reserve stated in its July business lending report, as companies seek new credit lines or increases in existing credit lines. Businesses plan to finance inventory and accounts receivable, invest in plant or equipment, and enter into mergers and acquisitions.
Demand has also increased for commercial real estate loans. The Fed reports stronger demand for construction and land development loans, as well as multifamily building loans with loans secured by commercial properties.
How to Leverage from Borrowing
Today, there are several ways small and large businesses can leverage growth through borrowing including:
- Commercial Card Solutions
- Commercial Payment Solutions
- Commercial Real Estate
- Business Term Loans
- Lines of Credit
- Letters of Credit
- Small Business Credit Card
- Small Business Administration Loans
Growing with the Economy
For many business owners, leveraging is a way to expand and achieve their goals. However, businesses should always be careful not to take on too much debt. A responsible lender can help with this as well.
When done responsibly, businesses that leverage can purchase equipment and hire people more quickly than they would otherwise be able to. That, in turn, can help a business grow along with the economy while consumers are increasing their spending.
NOTE: The link to the Federal Reserve report cited above is here: https://www.federalreserve.gov/data/sloos/sloos-202107.htm