Capital investments: Thinking toward the future

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Capital investment decisions can be challenging under the best of circumstances and are often complicated by overarching economic conditions. A range of headwinds – from inflation to labor challenges to fluctuating interest rates and more – can create concern and uncertainty.

When faced with concerns about the business climate, it’s natural for business owners to postpone new projects and reduce capital investments. What many business owners may not realize is that history suggests that companies that consistently invest in innovation may emerge stronger for their efforts.

Planning for growth

Developing a robust capital investment strategy requires a long-term mindset that focuses not only on addressing short-term challenges, but also on planting the seeds for opportunities that may pay off down the road. In addition, timing can be a crucial factor. When competitors are cutting back, it may be a good time to acquire resources to support growth and expansion.

During the 2007-2008 global financial crisis, innovators who were studied outperformed non-innovators by 10% and also outperformed the market by upwards of 30% in post-crisis years.

Looking beyond the traditional

Looking at the unique challenges you anticipate facing as you grow your business can help to determine where to make investments that matter. For example, labor challenges are an area where many small business owners are looking to automation as a solution. This may signal a shift in capital expenditures away from traditional areas such as equipment to investments in automation and artificial intelligence that may help address productivity and efficiency without adding labor costs.

COVID-19 changed how businesses invest. ‘Plant and equipment’ is becoming more ‘equipment’—especially IT equipment—and less ‘plant’.

Taking a strategic approach

There are many decisions to make when considering capital investments. Along with performing a short and long-term analysis of benefits and risks, it may be prudent to think through other impactful considerations such as cash flow factors, liquidity implications, budgeting, tax incentives, and more. The consistent payment terms associated with debt allow business owners to know up front how an investment will impact cash flow§.

Huntington can help you address many facets of your business by bringing forward key insights, new ideas, and thoughtful solutions. Connect with the business banking team at Huntington to discover the many ways we can help you grow and strengthen your business.

Furstenthal, Laura, Erik Roth, and Sean Brown. 2021. Innovation - The Launchpad Out of the Crisis. September. Accessed January 11, 2022. 

Bachman, Daniel. 2022. “Is the writing on the wall for buildings? Business investment since COVID-19.” Deloitte Insights , January 28. Accessed January 11, 2022.  

§ McCullah, Susan. 2022. “Debt financing vs. equity financing: Do you want to take out a loan or take on investors?” Insider, March 10. Accessed January 13, 2023.  

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