Businesses hoping to take advantage of the Federal Government’s 50% investment allowance before the end of the year may be struck down by complex funding requirements, an industry expert has warned.
And companies wanting to use the allowance before the 31 December deadline have been told to have their funding applications delivered within the next fortnight.
Matthew Atkin, equipment finance specialist at national finance broking group Interlease, says the investment allowance is a “fantastic” tax-break but funding requirements are changing quickly.
“The 31 December deadline is the cut off for small businesses to have finance orders in place, but funders are already incredibly busy as it is, and they’re putting deadlines in place and making criteria harder to meet,” he says.
Atkin warns that many businesses will miss out on the investment by waiting too long to put their applications into lenders, and also says requirements may be misunderstood.
He also recommends dealing with a number of different funders in order to cover as much ground as possible, as some may not be prepared to fund certain types of equipment.
“Every funder has different credit criteria, and it’s hard for businesses to really understand which to know about which deal. Some funders won’t deal with certain payment deals, others won’t lend for certain types of equipment and others want 100% security.”
“What these funders want is deep confirmation, and so businesses really have got to try and understand what these funders are asking for, and that’s certainly changing weekly. If you’re a guy running a business it’s very hard for you to keep up with these changes and know what to do.”
As a result, Atkin says he is telling clients to have their applications ready within the next fortnight and deliver them so any misunderstandings or funding requirements can be clarified before the deadline runs out.
“We are telling our clients now that in the next couple of weeks they need to have their funding applications in place and they should be getting on to that very quickly.”
“Additionally, businesses need to be aware that they really need to have done due diligence on what equipment they’re investing in and have a deep knowledge of what it’s going to be used for.”
Atkin warns businesses to seriously consider whether the equipment they plan on buying will add to their bottom line and contribute to the business’s viability. “Any application has to be really backed up by rigorous cashflows,” he says.
But despite the difficulties, Atkin says businesses should get on to their applications so they don’t miss out on the “once in a generation” tax break.
“It’s a rare opportunity to get something and expand your business with a good tax break. If you’re purchasing capital equipment you’re going to get a once-in-a-generation offer, and it’s a very attractive investment.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
