According to recent research, 2021 is not predicted to be full of doom and gloom as perhaps it was last year. What it does reveal is that many businesses have been investing their capital during their ‘downtime’ to enable them to recover with strength once the pandemic is over.
Much of this investment has been in equipment and software, both of which are fast-becoming vital to achieving expansion and profit growth.
Investment in equipment and software fared better than overall GDP growth in 2020 as businesses in the US invested to adapt to the COVID-19 pandemic. This growth is expected to remain well into positive territory in the beginning of 2021.
Annual equipment and software investment growth of 7.8% is forecast for 2021, according to the Equipment Leasing & Finance Foundation, which also predicts GDP growth of 4.7% for this year.
Equipment and software investment surged to an annualized rate of 47% in Q3 after an unprecedented 28% decline in Q2. Prospects of widely-distributed vaccines in 2021 boosted the economy, particularly in transportation-focused industries.
While equipment and software investment is forecast to grow 7.8% in 2021, some industries will likely continue to struggle under the weight of the pandemic until a vaccine is widely available.
The US manufacturing sector recovery continued in late 2020. Shipments and new orders of core capital goods rose to record levels as firms in several industries responded to elevated demand. Though output is relatively close to pre-pandemic levels, manufacturing employment remains significantly depressed.
For those businesses in a position to invest in equipment and tech, either with or without government stimulus, it is becoming considered opinion that it is the only way to weather the storm and flourish once the pandemic is over.
The Foundation’s research showed that over the next three to six months, year over year:
- Agriculture machinery investment growth will accelerate
- Construction machinery investment growth should rebound
- All other industrial equipment investment growth should experience a strong resurgence
- Medical equipment investment growth should continue to strengthen
- Mining and oilfield machinery investment growth should improve from current levels but may remain in negative territory
- Aircraft investment growth appears to have bottomed out earlier in the year and should improve, but is likely to remain in negative territory
- Ships and boats investment growth should turn positive
- Railroad equipment investment growth should strengthen
- Trucks investment growth appears likely to rebound after bottoming out in Q2 last year
- Computers investment growth should remain robust and may strengthen further
- Software investment growth should improve significantly
Naturally, these are predictions and should not be taken as red due to the fact that smaller businesses are challenged when it comes to financing change on this scale.
From our point of view at Faison Capital, we have seen the rise of business investment, particularly within the area of cloud-based software solutions. For many small operations with fewer than 500 employees, coming up with the capital required to finance new equipment to improve productivity is just beyond their bank balances.
If these smaller businesses can show our team that they have consistently made profits in recent years and that growth is hampered only by lack of funds, we can help.
Faison Capital introduces bespoke tech systems that allow businesses to rapidly scale their operation, while providing the capital to enable them to meet the challenge of expansion. This allows the right businesses to harness technology they otherwise would not have access to that increases their bottom line almost overnight.
Our unique growth strategy completely alters the trajectory of the small businesses we acquire, with an average of 25% revenue growth achieved within the first 12 months. From year 2 onwards, growth is maintained at a sustainable rate to generate an attractive investment income.
If you are interested in finding out more about how to diversify your investments within the small business arena to earn market-leading returns, contact us to arrange a call.