The federal government’s small business tax incentives present an enormous opportunity for brokers, as demand for asset finance surges.
In June, the government’s Jobs and Small Business package, announced in the budget, passed through the parliament. This means that all small businesses – with a turnover of less than $2 million – can immediately deduct every asset costing less than $20,000 that they have purchased since Budget night and can continue to do so until the end of June 2017.
According to asset finance aggregator NLG Leasing, loan applications to SMEs have surged 400% for the aggregator in the year to October 2015. Frank Crombie, NLG Leasing's director of aggregation services says this is largely attributed to the recent legislation and can present significant opportunities for brokers – particularly when structuring the $20k business purchase through a lease or chattel mortgage.
“SMEs are continuously seeking alternate financing solutions,” he said.
“Financing business goods through asset finance alleviates cash flow whilst still enabling the benefit of the tax deduction. The acquisition through a leasing structure is a smart alternative that allows the reallocation of funds to other areas of the business that can have a positive effect on efficiencies, productivity, sales, and ultimately growth.”
NLG Leasing has been writing tax relief related leases for financing motor vehicles, tools of trade, IT equipment, machinery, point of sale items and manufacturing equipment.
According to Crombie, asset finance is easier to diversify into that many mortgage brokers may believe.
“I think the misconception that most mortgage and residential brokers have about asset finance is that it is really difficult and vastly different to what they do on the residential side of things — which is completely untrue,” Crombie told Australian Broker
“From a commercial perspective, none of the NCCP applies, but from an NCCP point of view, all of the same documentation, all of the processes, requirements and objectives are all the same for asset finance and residential.”
For Crombie, this means that diversifying into asset finance should be a ‘no-brainer’ for brokers.
“I think the biggest motivation [for brokers] would be about ring-fencing their client. I don't think any mortgage broker can afford to be pushing their customers into the hands of either another broker who does both asset finance and mortgages, or potentially to a bank who have a ‘whole share or wallet’ approach,” he told Australian Broker