Ask an expert finance versus cash

Man Contemplates Finance or Cash?

When it’s time to invest in expensive new equipment for your workshop, how often do you pay cash for it without even thinking about financing options?

For many people in business, it’s almost a reflex action. We pull out our wallet and hand over our Capricorn card to pay in full the following month. For others, it’s just an easier way to get what you want — avoiding the time and paperwork involved with taking out a loan.

But often the equipment we need to operate our workshops successfully and to grow our businesses is expensive. Hoists, scan tools, tyre changers and spray booths don’t come cheap. Paying cash for them can empty the company bank account and cause serious cash flow problems, making paying wages and taxes a headache.

Despite what your instincts may say, using a financing option may be a much more practical solution. It allows you to pay off the expense over a longer period. If you could remove the delays and paperwork involved in applying and getting approval, taking out the loan may be a no-brainer.

Which is why Capricorn Financial Services has done exactly that.

Melanie de Jager, Capricorn’s Credit and Transactional Services Manager, said Capricorn Members can be easily approved for financing of business equipment purchases up to a value of $250,000.

“Mostly it’s a simple, paperless process — depending on when Capricorn last received them, the only thing we need from Members is their identification documents. For loans over $150,000, additional documents like financial statements will be required” she said. “We have no lengthy application forms to fill out, simply send us a quote from the Preferred Supplier you’re purchasing from and we get the approval process underway.”

“Beyond that, as long as they have a satisfactory credit rating and track record with Capricorn, they're approved.” Melanie said Capricorn’s finance offering is very competitive with banks and other financiers’.

“The main benefit is the simplicity of it,” Melanie said. “We’re going to make it very easy for you.”

But there are other benefits, too. You earn Capricorn Rewards points on the full amount of purchase, even if you paid a cash deposit. It is also possible to use your points towards the cost of the purchase.

Melanie said there are particular advantages to using financing instead of cash to buy business equipment right now, thanks to changes to the depreciation rules for small businesses which have been introduced by the Australian Government in response to the pandemic.

These include a temporary increase of the instant asset write-off threshold for eligible businesses from $30,000 to $150,000.  Eligibility has also been extended to businesses with an aggregated turnover of less than $500 million (up from $50 million).  These rules apply in relation to assets first used or installed ready for use between 12 March 2020 and 30 June 2021, and purchased by 31 December 2020.

 The Government has also introduced temporary full expensing for some assets until June 2022.

Check out the Australian Tax Office website for more information on these changes.

Melanie said Capricorn has seen an increase in the number of Members taking advantage of the financing option on equipment this year. She said she believes the pandemic has seen many in business choose to hold onto their cash in case of another lockdown, so they can still have funds to pay wages and tax. So when it comes to your next piece of equipment you know where to go if you choose to finance that purchase.


Find out what financial assistance you are eligible for


Disclaimer: This article does not, nor is it intended to, constitute legal, financial or other independent professional advice. Please consult your professional adviser before relying on any information contained herein. Capricorn Finance offers business equipment finance through Capricorn Society Limited (ACN 008 347 313) and brokers business finance through Capricorn Society Financial Services Pty Ltd (ACN 129 134 667). Fees and charges, terms and conditions, and lending criteria apply.
This article was published 02/03/2021 and the content is current as at the date of publication.