If you're buying new business equipment, there are a number of ways to finance your purchases. NAB Agribusiness General Manager Khan Horne explains the type of business lending options available.

What's available for business equipment financing

The agriculture industry has changed a great deal in recent years. New technologies are helping boost productivity and reduce labour costs – and many business owners may be considering opportunities for growth. That might mean investing in new production facilities or buildings, buying a vehicle for your small business, or purchasing business-specific tools or business machinery to improve efficiency.

When it comes to investing in equipment, there’s a lot to consider. Should you buy new or second hand? Which brands are best? What about re-sale? Perhaps the most important question to ask yourself is, what's the most cost-effective way to fund your purchases – working capital, a vehicle or equipment loan, or another type of financing arrangement?

Should you buy with existing capital – or explore business finance?

Seasonal cash flow fluctuations can make vehicle and equipment purchasing decisions especially difficult (the NAB cash flow template is very helpful), but there are a number of ways you can finance business purchases. While some business owners opt to dip into their working capital to buy what they need, others find business vehicle and equipment financing a better alternative.

NAB Agribusiness General Manager Khan Horne says the bank is seeing a lot of interest from customers looking to upgrade at least some of their equipment, and he urges them to carefully consider all the business loans and finance options available.

“Remember there is more than one way to finance new equipment, and outright purchase is not always the best way to use the capital you have. Generally, it is good business practice to have a balanced mix of debt and equity.”

Can you customise repayments to your cash flow?

It's definitely a possibility, depending on your situation. Banks are now offering more flexible vehicle and equipment financing options, with the opportunity to match repayments to periods of higher cash flow, which is a smart way to get the equipment that your business needs.

“We’ve seen a growing need to provide even more tailored products for farmers to meet their individual circumstances, given the cyclical nature of cash flow,” explains Mr Horne.

“If you make the most of your sales in summer, you should be able to make the most of your repayments at this time, and have the repayments for the rest of the year adjusted accordingly. You also shouldn’t have to pay a deposit on your new purchase.”

Don’t forget, a business loan calculator can be a handy way to assess what you can borrow and the repayments you’d need to make on any business loans or finance arrangements.

Which equipment financing option would best suit your business?

You’ll find lots of financing options available, including small business loans, machinery finance or vehicle and equipment financing. Tax implications may apply, so it’s important to seek independent advice from your accountant or financial adviser about any business lending and your specific circumstances.

Buying new equipment can be expensive and, as with all important business decisions, it’s a good idea to get expert advice. NAB Agribusiness has leasing specialists that can work with you, your financial adviser and your local Agribusiness Manager to help you structure a facility that best suits your needs.

Important information

The information contained in this article is correct as of July 2018 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

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