What is money: commodity or confidence?

Posted: Tuesday, 21 March 2023 @ 10:04

Currently, at Rivers, we're finding that there's a strong demand for our lease and loan products from borrowers with good covenant value, indicating confidence amongst the business community. 

That demand is despite uncertainty in the economy, with high inflation (which does seem set to come down over the course of the year), resultant increases in interest rates and the higher cost of living - particularly relating to fuel and food costs. 

In our experience it’s typical that amidst grim headline news, the UK business community stoically puts axe to the grind and through grit, determination, collaboration and innovation, pulls the country forward into brighter days. Essential to achieving that is the way we treat and the way we provide access to money.


Money as a commodity 

Lots of us have a difficult relationship with money - finding it to be a cause for excitement or anxiety. It's all too easy to forget that it's a commodity much like fuel or groceries themselves. 

On UK banknotes we see the words: 

'I promise to pay the bearer on demand the sum of five/ten/twenty/fifty pounds.' 

It's a historic term that dates from a time when our notes represented deposits of gold. That has not been the case for a long time and we no longer exchange banknotes for gold. In fact, most of us rarely even exchange banknotes any more, courtesy of digitisation. However, the principle remains and it's on that basis that we continue to use money as the basis of our commercial endeavours. 

It's a helpful reminder that money is no more or less magical than any other commodity - something that can be all too easy to forget, especially when we don't have access to enough of it. 


Money as a symbol of confidence 

With this in mind, it's perhaps worth reflecting that above all else it is confidence which drives business and also underpins a belief in our currency itself. 

If you have confidence that there will be fuel at the petrol pump, you will run your car down and not think about it. However, if you are not confident that there will be fuel at the pump, you will start to think about filling up when it's 75% full - that's as true of money as any other commodity. Ultimately, as we know, if money is to fulfil its function, we the public must have confidence that it will retain its value.

Time, history, culture and different economists have pondered the meaning of money across the centuries, hypothesising in different and lofty ways on its significance and its importance. However, from our perspective as an SME and as a lender to other SMEs, we consider the functionality of money in terms of enabling business owners to get on with the successful running of their companies with confidence. It’s a tool for growing the bottom line, paying staff and taking up new opportunities by having the cash to keep things moving and to invest.

Having access to money 

Herein lies the lesson - it's not so much about having money as knowing you can access it when you need it. For businesses at any time, but especially in a fluctuating economic climate, where you're unsure if your gas bill will be £5 or £500 or whether interest rates are going to jump threefold next month, financial management, including resources for cashflow, is essential.

In our last article on inflation and our fixed interest rates, one of our Non-Executive Directors, Stephen Bassett, said: "The situation is a reminder to think about how to make your business more resilient, and one way of doing that is through sensible cash flow, which is where measured borrowing can help you be a bit smarter. Instead of buying the new machine outright, lease it so that you retain cash to operate the business each day. Think ahead and lease it or borrow money at fixed rates, so you know where you stand and you have cash in the bank." 

So, is money a commodity or is it a symbol of confidence? Ultimately, in our humble opinion, it's both.Interested in gaining access to fast working capital availability for greater flexibility and cash flow?

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Rivers Leasing plc

Amba House, 15 College Road, Harrow, HAI IBA

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