Sharpen Your Axe

Abraham Lincoln was quoted as saying “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

It’s a business metaphor for ensuring tools and equipment are helping to achieve goals and outcomes and not holding a business back. Unfortunately, many SMEs continue using outdated or ineffective machinery, when upgrades or replacements will make them more productive and improve output. It is especially relevant in this age of technological advancement and innovation.???

However, purchasing new equipment for a business requires a large capital outlay. Many businesses don’t have ready access to significant liquid capital or funds.

By taking out asset finance, your self-employed clients can reduce the risk of owning old equipment and remain at the forefront of their industry with the latest technology.

Benefits

The benefits of asset and equipment finance include the ability to:

·???????arrange for up to 100% financing of equipment (e.g., new vehicle) cost

·???????access the latest technology and the best equipment in the market

·???????invest capital expenditure and cash in other areas of the business

·???????take advantage of technology upgrades and maintenance included in the deal

·???????bundle the finance costs of the equipment and make a single monthly payment

·???????fixed repayment rates are inflation-proof and allow for budgeting for the cost of finance

·???????choose to lease or own the assets and equipment

·???????finance products that help preserve working capital

·???????access flexible funds with a quick turnaround time when needed

Considerations

There are certain important aspects to consider in making an objective, positive decision when comparing asset finance options:

·???????Repayment schedule:?Determine if the repayments that are set out in the asset finance loan are flexible and can meet the ebbing and flowing cash flow of your client's business or if they'd be better suited to a strict repayment schedule to keep you on track.

·???????Varied minimum and maximum loan amounts:?With a minimum of $20,000 for some asset finance loans, it's important to figure out just how much debt your client's business can handle.

·???????Lease or own the new equipment:?Some lenders provide the option to lease or own the new equipment, which is handy to look out for, as it might be better for your client's business to lease new equipment instead of owning it outright.

·???????Variable rates:?Variable rates are something to look out for, before applying for this loan, as some rates are based on market-related rates whereas others have a set rate that you know before applying.

·???????Fees:?Application fees for these loans are dependent on whichever lender is selected.

·???????Taxation advantages:?There are several structures to consider when financing equipment. Every structure encompasses its set of possible taxation advantages. Therefore, your clients should consider seeking their accountant's advice to understand which structure best suits each client's requirements.

Asset & Equipment Financing Benefits and Considerations is part of the Asset and Equipment Lending module in the?Business Finance Certification, a professional development program that helps position you as an SME Finance specialist, so you can help your clients succeed and prosper.?

For more information go to:

https://www.elevateb.com.au/bfclp