Asset finance surge shows SMEs investing for growth

Big bank experiences 17% lift

Asset finance surge shows SMEs investing for growth

A surge in financing for small businesses shows they’re investing for growth, says the Commonwealth Bank of Australia.

Australia’s biggest bank said asset finance data showed a 17% lift in financing for equipment and machinery across the SME sector in the current financial year (July to March), compared to the same period last year.

The biggest investment boosts were in forklifts (up 395%), trailers (up 312%) and electric cars (up 156%).

Just over two-thirds (67%) of businesses had budgeted for new equipment over the next 12 months, with just over half (55%) planning to invest in IT and office technology, CBA said.

Read more: SME confidence plummets during COVID outbreak, says NAB survey

CBA executive general manager for business lending Grant Cairns (pictured above) said he expected the growing rate of investment to continue. 

SME investment was buoyed by a range of incentives, including new interest rates for SME Recovery Loans, extension of the Federal Government’s instant asset write-off scheme to mid-2023, and new tax incentives announced in the Federal Budget, encouraging small businesses to invest in technology and training, Cairns said.

The Federal Budget included measures allowing small businesses to receive a tax deduction of $120 for every $100 spent on training staff or investing in technology, up to a maximum of $100,000 per year.

“Government incentives have played a significant role in lifting business investment over the past few years,” Cairns said. “Since July last year, we have seen continued growth in asset finance in the small business sector, with the instant asset write-off scheme providing a good reason for customers to upgrade equipment and technology.

“There is also the government-backed SME Recovery Loan Scheme available until 30 June this year [eligibility criteria apply] as well as new government measures providing upfront deductions on digital infrastructure, so I expect we will see a continued uplift in small businesses investment.”

Committed to supporting businesses to invest in the future, CBA recently released lower rates for the Business Restarter Loan, CBA’s government-backed SME loan, Cairns said. Rates started from 3.29%, and flexible payment and security options, and repayment holidays, were available under loan terms.

CBA data showed a 13% year-on-year increase in financing under CBA’s Energy Efficient Equipment Financing, which provided a discount to customers financing for energy efficient vehicles, equipment and projects.

“As organisations welcome employees back into offices, they are investing in new technology to attract and retain staff and many are demanding sustainable business investments. We have seen an uptake in hybrid and electric vehicles, as well as investments across other assets, including IT equipment,” Cairns said.

An increasing number of small businesses recognised the benefits of replacing old equipment with energy-efficient alternatives.

“Many of our customers are utilising our leasing solutions and we’re able to offer packages that help businesses get everything they need now, with the flexibility to add on and upgrade in the future. Working with our strategic partner Equigroup, we have ways to help businesses convert these to leases and restore capital back for use in other areas, even if they have already paid cash for their IT equipment,” Cairns said.

Read more: Business leaders back ending of COVID isolation rules

As an Australian-owned small business lending specialist, OnDeck Australia CEO Cameron Poolman (pictured below) said the business had seen a huge increase in finance applications from transport (and transport-related) businesses during the COVID-19 pandemic.

The sectors seeking fast, efficient finance continued to be construction, accommodation and food services, retail trade, professional services (legal, IT and consulting), and manufacturing, he said.

In the fourth quarter of 2021, after lockdowns ended OnDeck saw an “impressive uptick” in demand for unsecured small business lending products.

“In 2022, we are already seeing a 380% jump in loan originations for our broker channel compared to 2021, and we believe additional economic tailwinds will contribute to further growth this year,” Poolman said.

As COVID-19 restrictions loosened, small businesses were benefiting from a boost in household spending. Capitalising on a recovering economy by investing in their own productive capacity made “good commercial sense,” he said.

But roadblocks could occur when small businesses faced onerous loan application processes and protracted response times.

“We are in an environment where small businesses need to act fast to secure the equipment they need on the best possible terms and get their business growing as soon as possible,” Poolman said.

OnDeck research showed one in four small businesses were rejected for finance by a mainstream bank. Among those approved, up to a quarter reported delays in the lending process that negatively impacted the business.

In the current business climate, no small business could afford that sort of delay, Poolman said.

“As small business experts, lending only to small businesses, we know how critical it is for smaller enterprises to have timely access to funds,” he said. “And a streamlined application process – and rapid response time - is central to this.”

Available for unsecured funding up to $150,000, OnDeck’s Lightning Loans enabled small businesses and their brokers to secure funding quickly, Poolman said.

OnDeck required six months of bank statements. Once uploaded to the portal, OnDeck could provide a decision on the application in 30 minutes, and access to funds in two hours.

LATEST NEWS