Equipment finance motivated by cash flow

by Caroline Dann25 Jul 2012

Cash flow is now the motivating factor for businesses seeking equipment finance, while the cost of a loan will determine which one they choose.

The findings are from East & Partner’s Australian Asset and Equipment Finance Markets report, which revealed 62.2% of businesses – the majority, by far - are seeking equipment loans to help cash flow. 
It puts it ahead of other areas traditionally associated with equipment finance, such as age of equipment, removing such assets from the balance sheets and general capital management needs.
Cost was the biggest factor when it came to businesses choosing a loan, although secondary factors varied across different markets.
Flexibility and ownership came second and third for micro businesses when choosing a loan, while residual risk and flexibility were more concerning to corporates. 
David Brown, East & Partners’ head of client development, said the equipment finance market would be affected by increasingly risk-adverse businesses.
“[They] are not replacing equipment as frequently as they were pre GFC, with asset lifetimes nearly doubling across most asset classes from IT Equipment to Yellow Goods. Businesses are still looking to deleverage and avoid risk in relation to asset and equipment acquisitions,” he said.
The good news, says Brown, is that banks are offering increasingly competitive rates to this “growth market.”
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