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Article | 4-minute read

What is asset financing and how can it help your business?

Business planning | Cash flow forecasting

When running your own business, having the right equipment is crucial. And there may come a time when you need to update your assets to ensure your business remains efficient and profitable.

Typically many business owners rely on their own cash to upgrade these important assets, like company cars, equipment for medical and dental practices, and earthmoving machinery for agriculture. Combined with overheads like wages and rent, these costs can put a huge dent in your cash capital.

That’s where financing your purchases can help reduce the impact on your cash flow. With ANZ’s Vehicle and Equipment Financing, also known as Asset Finance, we can help.

What is asset finance?

Asset finance helps customers buy or lease assets that are essential to the day-to-day operations of their business.

This form of finance can be a good way to secure funding because the vehicle or equipment itself acts as collateral for the loan, and approved customers may not need a deposit. This means you can preserve your business’ working capital.

So rather than impact your current ability to pay other bills, some customers may benefit from financing the purchase and paying it off over time (with interest).

What constitutes an asset?

An asset could be anything from a car to help you get from A to B, or light commercial vehicles and trucks for delivering stock. It could be solar panels to help reduce your business’ carbon footprint. A 3D printer to manufacture component parts. Or it could be upgrading your coffee machine so you can continue providing great lattes to your regulars. Essentially, it’s any piece of commercial equipment you use to operate your business effectively.

How can asset finance help your business?

As business needs and customer demands change, Asset financing can be used to renew and upgrade equipment. This allows you to meet those shifting requirements, without having to dip into your own pocket to pay for new equipment upfront.

 

“Asset financing helped one of my customers, an apparel printing and design studio in Sydney, grow their business by purchasing a high-end printing machine with the ability to print 400 shirts per hour. This new purchase meant they could expand their servicing offering quickly and speed up their production while continuing to offer a quality product.”

Nicole Xue, ANZ Business Banker

How does the GGS scheme apply to asset financing with ANZ?

In March 2020, the Australian Government SME Guarantee Scheme was introduced. The goal of the scheme is to support up to $40 billion of lending to SMEs by guaranteeing 50 per cent of new loans issued by participating lenders. This means that the government provides the security so businesses can access lending options more easily. The GGS has been extended until the end of June 2021.

It allows SMEs to borrow up to $1 million to finance vehicles and equipment, at a low fixed rate and with no establishment fee. Through ANZ, this financing is available to new and existing customers with an ABN and an annual turnover which is likely to be less than $50 million for the 2020-21 financial year.

A key benefit of the scheme is that the government’s guarantee helps us provide cheaper interest rates to ANZ’s asset financing customers.

 

Mile End Bagels needed a delivery van to help see them through the challenges of 2020. Working together, we were able to provide finance to get them delivering stock all across Melbourne.”

Luke McGowan, ANZ Business Banker

What is the Instant Asset Write-Off (IAWO) and how can it help you?

The federal government’s Instant Asset Write-Off (IAWO) has been designed to support businesses and encourage new investment to increase cash flow. Businesses are able to claim an immediate deduction on purchases of eligible assets.

During the 2020-21 Budget, the instant asset write-off (now known as Temporary Full Expensing) was updated, allowing businesses with a yearly aggregated turnover of less than $5 billion to claim a tax deduction for the full cost on any new depreciating equipment and vehicle assets they’ve purchased.  The depreciating asset must have been purchased after 7:30pm AEDT on 6 October 2020, and installed and ready for use by 30 June 2022, for it to be eligible for possible tax benefits.  This write-off can also apply to the full cost of improvements to existing equipment.

The purchase of second hand assets is also eligible.  This applies to businesses with a yearly turnover of less than $50 million.

When you combine the instant asset write-off with the Australian Government SME Guarantee Scheme, the benefits to your business could be significant.

Eligibility requirements apply, so talk to your accountant or tax advisor for more information on the instant asset write-off and to find out how this could assist your business when considering ANZ Asset Finance.

How is ANZ’s asset finance different from the other banks?

ANZ Vehicle and Equipment Finance gives you access to funding for vehicles and equipment, while offering flexible repayment options and competitive pricing plans, to help you budget more accurately. For example, customers working in agriculture can make repayments seasonally to align with harvest timing, or a business can tailor repayments to best suit their accounting cycle.

We’ve also joined forces with the Clean Energy Finance Corporation (CEFC) to help our customers find the right finance solutions to make energy-efficient asset investments.  Encouraging business investments in renewables is all part of our 2025 sustainability goals.

 

LRT/VCT Transport needed finance to help switch to a more energy-efficient onsite refrigeration system. With ANZ’s help, they were able to install a rooftop solar system, which brought down their power bills and drastically reduced their carbon emissions.”

Paul Connor, ANZ Agribusiness Manager

How can you apply – and how much time have you got to do it?   

To be eligible for the Government Guarantee Scheme you will need to apply before 30 June 2021. As this process can take time, we recommend starting the process as soon as possible so you don’t miss out.

Additionally, with low rates and no establishment fees, now is a great time to re-invest in your business.

To get the ball rolling, please chat to your accountant or tax advisor to find out if you’re eligible, and whether ANZ’s Asset Finance is right for your business. Then talk to your ANZ Relationship Manager or one of our dedicated Vehicle and Equipment Finance specialists for more information.

 

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