Businesses battle for funding as allowance deadline loomsBusinesses battle for funding as allowance deadline looms
Many small businesses are battling to secure bank funding with only weeks remaining before the Federal Government’s December 31 investment allowance deadline that allows them to claim an additional 50 per cent tax deduction on eligible depreciating assets.
As well as introducing tougher lending policies, the major banks are also imposing funding application deadlines on businesses of early December for guaranteed approval prior to December 31.
“Our clients are definitely telling us that access to funds is drying up from their primary bank,” said Matthew Atkin, equipment finance specialist at national finance broking group Interlease.
“We have had a strong enquiry from clients who are confused about credit decisions and not sure how to get the funds they require for capital purchases. The Government’s increased investment allowance is very attractive, but many businesses won’t be able to take advantage of it because of funding issues.
“It’s a double blow really, because the purchase of equipment from overseas is very attractive at the moment with the Australian dollar so high and rates still relatively low. The investment carrot has been dangled in front of small businesses but they can’t get their teeth into it.”
Mr Atkin said businesses need to be getting their funding application processes started now to avoid missing the end of year investment allowance deadline.
“When attempting to access funds businesses also must be aware of the changing credit landscape,” he said. “They cannot rely on the fact their bank has always approved applications previously due to the fact funders are changing credit rules or are applying the existing ones more strictly.”
“Some asset classes are not permitted unless there is dollar-for-dollar security via property or cash deposits. Businesses are being asked to provide additional security, even for stronger asset classes.
“This is all happening whilst the funders are appearing to take a greater margin on all commercial products including equipment finance. The rate cuts have never really flowed through into the equipment finance space. Businesses are therefore paying more for loans that are secured by more assets, so they are often far worse off even if they can get access to the funds.”
Mr Atkin said businesses must have access to a number of funders to ensure they are able to get an approval in place before December 31, and they need to know “who is going to buy their deal given their company performance, the asset in question etc.”
“They need to know which of the funders are willing to do the deal at a fair price and with as little security as possible. This is a full-time job, so they really need to have access to a specialist in equipment finance who can do this on their behalf.”
(Article by Matthew Atkin (Interlease))
