As businesses grapple with COVID recovery and the impact of global events, the federal government has implemented some initiatives for business that are likely to ramp up sections of the economy, particularly those involving apprenticeships and technology and training.
Earlypay client service managers across the country are already seeing a rise in the number of businesses seeking funding to invest in technology and training and staffing in the form of new apprenticeships. Earlypay Limited, an ASX-listed company (EPY), is Australia’s leading customer-focused business financing organisation. It provides invoice financing, equipment financing and trade financing to Australian small to medium-sized businesses.
What are the initiatives that stood out for businesses?
There are two initiatives generating a strong response. The increased tax deductions for tech and training and wage subsidies for businesses that employ apprentices in priority areas.
Businesses with an annual turnover of less than $50m will be able to claim a bonus tax deduction of 20% more than their actual expenses on new technology or external training courses up to 30 June 2023. This is an extremely attractive incentive and means that for example, if a business spends $1,000 on a new computer or on staff training, they will then be able to claim $1,200 as a tax deduction up to a maximum of $100,000 per year.
In the case of the newly formed Apprenticeships Incentives System, the initiative will provide up to $15,000 per apprentice. It is designed to provide wages subsidies for employers in priority occupations and hiring incentives for employers in non-priority occupations.
Apprentices and trainees in priority occupations will also receive a generous direct payment of up to $5,000 over two years to assist with the cost of undertaking an apprenticeship. The main question we are getting from businesses is, how can you help us to access more funding to take advantage of these tax and grant initiatives so we can grow our business.
Unfortunately for many businesses, the banks are slow and lending conditions are tightening. The good news is that there are specific lending facilities for businesses that can be set up quickly to help them access funding regardless of whether they have credit history issues, owe the Australian Taxation Office money or have only been trading for a short period.
What are the simple ways to access funding?
Getting funds in the door quickly is important when ramping up business, undertaking investment in new technology and training and hiring new staff.
It is an attractive option for many businesses. This works by turning existing business assets into cash. Sale-back Finance has its origins in equipment leasing; however, it is also used to finance transactions where a loan is secured over existing assets that the borrower has.
If a business owns an asset that is an unencumbered, a business finance provider such as Earlypay can give the business a loan against it, while allowing the business to continue using the asset. The loan is then paid off over a three to five-year period. At Earlypay we tend to recommend Sale-back Finance on eligible assets like vehicles or manufacturing equipment.
If the business is asset rich but having short-term cash flow complications, this method allows a business to keep using the asset while also using it as security for a loan.
It is a popular means of generating income fast to help a business fund the purchase of new technology and undertake other investments whether it be in operational assets or people.
Typically businesses that have ATO debt or a history of credit issues struggle to get finance through the banks which is why Invoice Finance has become the go-to option for businesses that need to unlock funds fast without taking out a loan or setting up a line of credit.
Businesses use their invoices as collateral to generate payment. It is a way for businesses to access funds against the amounts due from their clients. Invoice financiers like Earlypay can also take care of managing debtors and collections so the business can focus on operations.
Invoice Financing can help a business with its cash flow, pay employees and suppliers and reinvest in operations and growth earlier. The new government business initiatives provide a significant opportunity for many businesses to undertake capacity building and spearhead growth – provided they can find the funding to undertake those activities.
Daniel Riley is a finance expert and the Chief Executive Officer of Earlypay