Can a small business upgrade its equipment without finance?

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A small business can choose to upgrade its equipment with the working capital they have available in their accounts. However, using a finance solution protects cash reserves, ensuring the business can upgrade equipment without risking their investment power.

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Why it's important for small businesses to upgrade equipment

Many businesses rely on equipment to keep their business running efficiently. Essential items could include expensive IT hardware, farm machinery, manufacturing appliances or even something as seemingly common as a couple of company cars. Working with old and outdated machinery means a company risks falling behind their competitors or may even prevent them getting started in the first place.

Upgrading equipment can also improve safety standards or streamline quality control procedures, as well as make a business more energy efficient.

How to upgrade equipment without impacting cash flow

Businesses often think that it's only how good their sales figures are looking that matters. However, unless they have cash actually in their bank account and available for spending, they can struggle to keep up with purchases or expenses and things can quickly unravel.

Ensuring positive cash flow is the only way small businesses can keep up with essential payments and purchases alongside making investments. Allowing financial savings to get too low can leave a company unable to deal with unexpected emergencies, and without any other form of cash injection to tide them over.

Upgrading to new equipment with finance protects cash flow, ensuring that businesses can pay salaries, cover overheads and continue buying new stock. Businesses maintain control but also benefit from the efficiencies of new equipment.

There are also tax benefits available to your business with Instant Asset Write Off. Recently improved you can now offset up to $30,000 for new and used equipment. The availability has also been widened to include businesses with up to $50m annual turnover so most small businesses should qualify. It's important to speak to your accountant for your own circumstances and there is ATO guidance available.

There are a number of financial solutions available for small businesses to consider, including the following common options.

  1. Rental or lease agreements - Leasing equipment negates the need for a large down payment, and provides flexibility around renewing the contract after the initial term expires. This is useful if you don't need the equipment going forward, want to upgrade to a different make or change the type of equipment you use. It also means you're not affected by depreciation over time.
  2. Equipment loans - The finance company provide the funds for your purchase, and you pay them back in small installments. Once all repayments are complete, you own the equipment outright. Some companies use the equipment itself as collateral, while others may require a different form of guarantee against defaults. Loan terms can range from months to years, and the maximum value also varies according to the lender.


Equipment financing with Classic Funding Group


At Classic Funding Group, we offer tailor-made solutions to ensure every business can access the equipment they need for growth and success. With a fast turnaround, simple application process and can-do attitude for companies in every industry, you don't have to use personal property as security and you'll benefit from a predictable payment schedule.

It helps to talk about the kinds of finance solutions that might give your business more flexibility 

speak to our expert team