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High demand for asset finance

by Kate Aubrey10 minute read
High demand for asset finance

As supply constraints continue to hinder Australia’s SME businesses, new data reveals an increase in equipment and machinery investment in preparation for the future.

Despite some caution in SME lending amid financial losses sustained from protracted lockdowns, uncertainty around COVID-19 and major weather events – demand for asset financing has increased, according to the latest data from the Commonwealth Bank of Australia.

The data revealed equipment and machinery financing went up “significantly” in the first six months of FY 2022 compared with the same period in FY 2021 (up 87 per cent) and was up 86 per cent when compared with pre-pandemic FY 2020.

CBA’s executive general manager business lending, Grant Cairns, said the increase in demand has been largely driven by government incentives , such as the “instant asset write off” scheme and businesses offsetting supply constraints.

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“After the government extended the instant asset write off scheme last year, we saw a big uplift in financing for vehicles and equipment and expect this to continue into 2023, he said.

“The government-backed SME Recovery Loan Scheme is also available until 30 June 2022 and is an excellent initiative to ensure more businesses can access low lending rates on flexible terms.”

Mr Cairns said CBA has been working hard to deliver a range of “fast lending solutions” for businesses including fast access to funds via its lending platform, BizExpress, and Stream Working Capital, which removes the need for traditional fixed assets such as property and provides cash flow using outstanding invoices.

For small business owners who have a home loan with CBA, the bank is making it easier for them to access financing for vehicles and equipment.

CBA said it has simplified many of its asset finance processes to be able to recognise good payment history, to allow small business customers access up to $100,000 for business vehicles without the need to provide detailed financial documents.

Heavy machinery investment up

Mr Cairns said businesses – both small and large – were buying equipment and machinery “months in advance” in response to supply constraints, with record demand in South Australia.

Over the six months to December 2021, demand for equipment financing was highest amongst small and medium businesses in South Australia, with lending up 198 per cent in the state, followed by Victoria up 181 per cent.

While, Western Australia and NSW didn’t have the same record spikes in demand, both states saw increases in equipment lending (up 84 per cent and 53 per cent, respectively).

The largest new lending growth was seen in prime movers, which went up 1667 per cent year-on-year. 

Other machinery which saw an increase in demand included, moulding machinery (up 290 per cent), forklifts (increased 282 per cent), heavy trailers (up 254 per cent) and small agriculture equipment went up 124 per cent.

While trucks, excavators and earthmoving equipment also went up in demand (up 98 per cent, 82 per cent and 58 per cent, respectively).

Mr Cairns anticipates continued investment in capital goods will fuel future growth, as the Australian economy looks “strong in 2022”.

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