Running any kind of small business is a commendable endeavour, especially given the level of competition in the current market. You’re juggling a million things at once, and adding a lack of funds to the pile not only creates a lot of stress but limits your ability to be competitive with other businesses in your vertical.
This is where asset finance comes in. By funding new assets for your business without using existing capital, you stand to seriously benefit. But what are the specific benefits of asset finance, and how can you use them to do your best work without the stress of tight purse strings holding you back?
1. You Protect Your Cash Flow
As a small business owner, we don’t have to tell you how important cash flow is. Depending on the industry you occupy, one of the major benefits of asset finance is how much it can free up cash flow. This is especially useful if you’re in the early stages, where startup capital is in short supply and expenses are the opposite.
Instead of draining your cash reserves, which can put you in a precarious spot down the line, asset finance allows you to maintain a steady cash flow to cover your daily needs, unexpected costs, and capitalise on growth opportunities.
2. You Access High-Quality Equipment Now
If your business requires you to buy new equipment, that kind of expense can not only take a major chunk out of your available funds, but it might be prohibitive enough to stop you in your tracks. Growth is vital, especially in the early stages, so one of the core benefits of asset finance is how it can help you to stabilise your business at the outset with the necessary equipment.
This finance can even be weighted against the asset itself – hence the name ‘asset finance’ – so the risk to your existing assets is minimal.
3. You Tailor Repayments to Fit Your Schedule
One of the primary benefits of asset finance is its inherent flexibility. You may have a fairly stable business model, or your cash flow might fluctuate significantly according to the season. In either case, having the ability to tailor your repayments to fit your schedule is the dream for a growing business owner.
You might need longer terms, lower monthly payments, or a balloon payment that accounts for incoming client invoices at the end of the term. Working with the right brokers can allow you to create a plan that suits your immediate financial situation, ensuring you don’t end up in deep water with debt you can’t afford, all while getting you the assets you need to grow. Step carefully, conduct thorough research, and heed advice from trusted sources.
4. You Keep Your Business Agile
The age-old pivot has been keeping small businesses thriving for decades. Without immediate working capital, it’s tough to adapt quickly, especially if that adaptation requires you to acquire some new equipment. This is where asset finance comes in.
When new opportunities arise or you anticipate a shift in market demand, you can act quickly with asset finance, outpacing your competitors.
5. You Enjoy Potential Tax Benefits
Aotearoa has fairly complex tax laws; however, some asset finance agreements come with built-in potential tax advantages. Depending on how you structure your agreement, you can reduce your business’s taxable income by weighting the finance payments as expenses, helping you to free up even more capital come the end of the financial year.
If this is one of the benefits of asset finance you hope to reap, always make sure to check in with your accountant first. Every business’s situation is different, and consulting a professional who is familiar with your finances will ensure you’re taking full advantage of what’s available while still meeting all of your obligations.
6. You Improve Your Balance Sheet (and Borrowing Power)
Finally, using asset finance to purchase new equipment instead of tackling it all at once with a large upfront sum allows you to maintain a healthier balance sheet. Operating leases, for instance, may not be recorded as liabilities in the same manner as a loan, thereby strengthening your balance sheet for future potential investors. Once again, this varies significantly depending on your specific situation and the type of asset financing you choose for your purchase.
With all these benefits available, the key is to find a policy that suits your business, rather than one based on a template. When in doubt, always consult with a professional broker before signing on the dotted line, and conduct an honest inventory of your small business’s finances to determine what is feasible for you.
Once you have, you’ll know exactly how to arm yourself with the right assets to get ahead of the competition and stabilise your small business in the Kiwi market.
Access these benefits through GVK Finance, your trusted asset finance brokers.
We’re in the business of getting stuff done. If you’re keen to access the benefits of asset finance, we’re keen to help you get there. Reach out to one of our expert finance brokers so we can match you with the ideal policy today.