Upgrading or acquiring extra equipment, machinery or vehicles can provide a tangible return on investment through enhanced productivity and efficiency – and with end-of-financial-year sales in full swing, now’s the perfect time to give your business a boost.
How small business can make their cash go further
EOFY discounts aren’t the only reason this is a good time to review your business needs and equipment – there’s also the recent increase to the instant asset write-off threshold, which means that since April 2019, businesses with a turnover of less than $10 million can immediately write off the business portion of purchases under $30,000. That includes printers, computers, software and office furniture, regardless of whether they’re new or second hand.
For small business owners who don’t have access to the capital to fund such purchases, or don’t want to tie up cashflow that’s needed to support day-to-day operations, equipment finance is an ideal solution, according to Joe Formichella, National Head of Small Business at Bendigo Bank.
“People in start-ups especially often invest a lot of their money to get things up and running so, when it comes time to grow the business, sometimes they don’t have access to a lot of cash,” he says. “With equipment finance, you don’t have to put up any money, and you can borrow 100 cents on the dollar against that equipment itself, which means you don’t have to put up any other security.
“You can have equipment finance for up to five years as well, and you can get a repayment program to suit what your business can manage. So, it’s an ideal cash-flow solution – it preserves that capital in the business.”
Unfortunately, the Xero State of Lending Report found that many Australian small business owners lack confidence in their ability to invest in their business or struggle to access the capital they need to do so, resulting in a funding gap that could limit jobs and economic growth.
As it stands, 67 percent plan to primarily fund growth through business profits, while nearly one-fifth will rely on their personal savings – potentially restricting their ability to expand and upgrade their services.
Using finance to drive growth
Jon Burrell, director of Smart50 award winner Tentworld, says equipment finance has played a core role in the growth of his family’s business.
Investing in two body trucks, which service their southeast Queensland network, collecting stock from suppliers and delivering weekly to all stores, has boosted operational efficiency, helped them reduce out-of-stock time by controlling their own distribution, and allowed them to get more competitive delivery costs.
“We’ve also used it to buy a bunch of forklifts to ensure the warehouse runs as efficiently as it can – some of those are quite expensive, but very useful for a long period of time, so financing them makes sense,” Burrell says. “Obviously, getting finance on those things when there are such competitive rates is better than using the overdraft, so it helps with managing the cash flow and makes it easier to justify new capital purchases.”
To help small business owners keen to upgrade or expand their own outfits, Formichella says Bendigo Bank is having its own end-of-financial-year special and offering 3.99% equipment finance for selected new assets that are acquired and paid for before 30 June.
“We’ve certainly got a big focus on small business and we’re throwing a lot more resources and personalised support behind small business owners around Australia,” he says. “This is just one of many initiatives we’ll have over the coming 12 months, so watch this space.”
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