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How to Use Asset Finance to Boost Business Productivity and Cashflow

March 9, 2021 | No Comments on How to Use Asset Finance to Boost Business Productivity and Cashflow

Whatever industry sector you operate in, your business will always face the need to buy more and more equipment as it grows.

Whether it’s a new vehicle, machinery or IT equipment, purchasing new fixed assets can be a major drain on your business cashflow. For most businesses, a smarter option is to use an Asset Finance solution, such as a chattel mortgage or leasing arrangement.

Why use Asset Finance?

Businesses face a constant need to finance the purchase of new plant and equipment, to keep the business productive.

It might be because your business needs equipment to take advantage of a new opportunity. For example, a new client or project could require you to invest quickly in new assets. Maybe there has been a change in the market, and your business needs to pivot quickly into a new product line to allow for future growth. And some types of asset are simply too expensive for owner operator businesses to fund as a capital expenditure (or “capex”). Vehicles, for example, can add up to hundreds of thousands of dollars.

Another scenario is where you need to upgrade your existing company assets. All equipment has an operating life, after which it stops working efficiently or starts to suffer from safety or maintenance issues.

You might also need a quick and easy cash injection into your business to finance a new opportunity, plug a short term cashflow gap or finance a strategic project. You could consider using Asset Finance solutions to activate the equity tied up in your existing equipment and machinery.

What are the options?

There are a variety of Asset Finance options available. Two of the most common include:

  • Chattel mortgages. Your business owns the asset, with a lender paying the upfront purchase price. Repayments are made over the life of the loan and the lender has security over the asset.
  • Finance leases. Under this arrangement, the lender owns the asset and leases it to the business. At the end of the loan term, there may be an option to pay out the loan to take ownership of the asset.

What are the benefits of Asset Finance?

Asset Finance solutions can be established quickly, so there will be no delay in your business getting the assets it needs to drive growth.

Loan amounts can range from as little as $20,000 through to a major facility – even worth millions. The funds can be used to purchase either new or pre-used equipment, with no age restrictions, giving you a lot of flexibility. Repayments can be structured to suit your current business needs and growth plans. That can help smooth out the cashflow challenges of a new purchase, giving you confidence with the simplicity and stability of a regular monthly payment.

There are also tax and accounting benefits. Depending on the financing method, you may be able to claim GST input tax credits in your monthly or quarterly Business Activity Statement. You may also be able to claim depreciation and interest payments as a tax deduction. Another big driver is that businesses can also claim an immediate tax deduction for the cost of an asset. That’s an instant tax write-off on equipment up to the value of $150,000 – perfect for upgrading out-of-date equipment, vehicles, trucks and trailers.

Business owners also favour Asset Finance because it doesn’t require them to provide their personal assets as security. So, that means more growth – but less personal financial risk.

With expert help, Asset Finance facilities can also be structured to suit your business requirements. As not all businesses are the same, at PFBS, we can help you structure and implement the right Asset Finance solution to match your business and asset position.

To get started, simply call us now at PFBS – Australia’s Working Capital experts.

 

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