A business can’t succeed without the right tools. If you operate in a competitive market, the right equipment can be vital to long-term probability. But accessing new equipment and technology is an issue for growing companies in every industry. Nearly 1 in 4 Australian businesses state that they are operating with outdated assets.
New equipment can be expensive. The upfront cost of purchasing state of the art equipment can put a strain on the cash flow of any SME.
That’s why many business owners are turning to Equipment Finance to fund new investments.
What is Equipment Finance?
Equipment Finance is a funding solution designed to help businesses purchase the equipment, machinery, and vehicles they need. An Equipment Finance facility can fund up to 100% of the value of a business asset purchase.
The cost of the asset is then repaid over a fixed term and with a fixed interest rate. Because the funding is secured against the asset’s value, you don’t need to use your home or personal property as collateral.
Depending on the terms of the funding agreement, the business may take ownership of the asset once the final payment has been made.
You can use Equipment Finance to fund a number of assets, including:
- Industrial machinery
- Manufacturing equipment
If you’re thinking about making a large business purchase, you should consider the benefits that Equipment Finance can provide to your company.
1. Increase Working Capital
The most compelling benefit of Equipment Finance is the increase in working capital it provides. A significant outlay on equipment can leave your business vulnerable to a cash flow shortage.
Rather than making a large upfront payment, you can spread equipment costs over a much more extended period. You can use the equipment to increase your revenue, and repay the cost of the purchase in more affordable instalments.
Equipment Finance allows you to maintain liquidity to invest in other areas of your business and take advantage of new opportunities as they arise.
2. Work With the Best Equipment
Equipment Finance allows businesses to capitalise on new technology and innovative solutions in their industry without stretching their finances. You can utilise the latest equipment to improve operational productivity and efficiency.
According to Ricoh’s report Digital decade: Innovation in 2020 and beyond, 46% of Australian businesses are looking to improve operational effectiveness by spending on innovation, with 44% looking to reduce costs and operational expenditure.
The same report reveals that the most significant barrier to innovation for Australian businesses is a lack of budget.
Equipment Finance helps companies to overcome that barrier and purchase the tools and technology they need. Small and medium-sized businesses can access the equipment they need to compete with larger competitors.
3. Avoid Depreciation
Machinery, vehicles, and many other types of business equipment can suffer from fast depreciation. As the value of the equipment reduces, so does the value of the company’s assets. For example, a new business vehicle can lose up to a third of its value once purchased as the asset becomes second-hand.
If equipment depreciates faster than expected and becomes unusable, it will need to be quickly replaced to avoid disruption to operations. This can create cash flow issues for the business.
Equipment Finance helps to remove that risk as the finance company will usually take responsibility for depreciation. If the equipment fails to last the duration of the agreement, the finance company will usually replace the equipment at no additional expense.
Some Equipment Finance solutions can also provide tax benefits. When equipment is leased rather than bought outright, it’s categorised as a monthly expense and not as an asset on the company’s balance sheet.
4. Protect Available Lines of Credit
Traditional banks and finance providers require borrowers to meet strict lending criteria, including property security. For many businesses, that means loans and overdrafts are out of reach.
Even for businesses that do qualify for these funding options, using a loan or overdraft to cover an equipment purchase removes these lines of credit for any future borrowing needs.
By utilising an Equipment Finance facility, businesses can keep these lines of credit open rather than using them on a depreciating asset. Should the company want to fund expansion or capitalise on an opportunity in the future, they will still have the option of applying for other types of business funding.
Equipment Finance is a flexible funding solution that can sit alongside a bank loan or other financing arrangement.
5. Fast Application Process
This type of funding is much more accessible than a loan from a bank or traditional business lender.
If your business has a strong credit rating and the equipment is likely to hold its value, funding can be put in place in as little as 24 hours. For high-value equipment purchases, it may take a little longer to collect the necessary information and secure financing.
Even for businesses that lack a long trading history or strong credit rating, Equipment Finance can still provide the funding you need.
6. Scalable Funding
Equipment Finance is a scalable funding solution that is well suited to startups and growing businesses. If you need new equipment to scale up your operations, Equipment Finance can provide the tools and machinery you need without tying up your capital and disrupting growth plans.
For example, if you need to increase logistics capacity to take on new customers, you can quickly upgrade or add to your fleet of vehicles. As your business grows and requires increased investment, you can quickly secure funding and add new equipment to your business operations.
ScotPac Equipment Finance
When a business has the equipment it needs, it can be more productive, make more sales, and generate more revenue.
We help businesses to get the equipment they need to grow. There’s no property security required, and our Equipment Finance solutions can be customised to your business’s exact needs. You can fund the purchase of new and second-hand equipment from domestic and overseas suppliers.
If you’re thinking of purchasing new or second-hand equipment, use our handy enquiry form to apply now or call our business finance experts to see how an Equipment Finance solution can help you.