What should small businesses look for?
Equipment financing is a critical component of small business decision-making, having the potential to facilitate uninterrupted operations and provide an avenue to growth, and for businesses considering using a broker there are a number of factors to keep in mind.
Making the right decision for your business can provide both immediate and ongoing benefits, and it can be beneficial to keep an eye on long-term goals and expectations.
As noted by Finlease Founder and CEO Mark O’Donoghue, businesses seeking out a broker should consider whether the broker has experience in their particular industry, along with the broker’s capacity to provide a specialised and flexible service.
“It’s the expertise of the broker that’s going to deliver the right outcome, and it’s probably no different to the arborist figuring out what machinery he needs to take to what site to perform what function,” Mark told AA.
“If you’re dealing with a decent broker, that’s what they do all day – it’s all about understanding the appropriate structures, and what levers are going to do what.”
What to look for: a specialised and flexible service offering Highlighting the importance of industry knowledge, Mark observed that a broker should have a thorough understanding of the type of equipment commonly used in a particular industry, providing insight into why a business needs to buy equipment and the financial justification for the purchase.
This type of knowledge should be underpinned by a preparedness to accommodate business owners, who may need assistance outside of typical business hours.
“A good broker should be available on his mobile after hours, often on the weekends,” he commented. “Similarly, if you need a set of finance documents signed, the broker should be seeing the client, either at their office or the site that they’re working at.
“If you think of brokers as being very similar to their clients, in other words they’re small businesses themselves, they need to have good service offerings to make sure they maintain their clients a long time.”
In addition to this, for businesses considering using the services of a broker, it is important to take into account what the market is saying.
“I think anyone looking at a broker should look to see what’s the independent feedback about that broker,” Mark told AA. “Do a little bit of research to see that they’ve got happy clients – if they’ve got happy clients, there’s a good chance that you’re going to be happy.”
The wider perspective: providing additional benefits for businesses
Mark noted that brokers should have a broader understanding of their client’s business operations and requirements beyond finance, observing that “a good broker should be doing more than just organising money”.
By way of example, he pointed to the federal government’s instant asset write-off, which was expanded last year to eligible businesses with a turnover of less than $50 million, applying to assets that cost less than the threshold of $30,000.
“Brokers need to make sure that their clients know that if they buy a piece of machinery for $25,000, that they can immediately claim that as a deduction on their profit/loss account, despite the fact that they might put it on finance over five years,” Mark explained.
“However, it would be important to use a chattel mortgage, where you are shown to be the owner from a tax point of view, as opposed to a lease, where you’re not the owner, because you’ll miss out on the depreciation.”
Mark additionally stressed the importance of maintaining a productive client-broker relationship over time, pointing to the long-term benefits that can be delivered.
“A broker should do everything possible to ensure they’ve got a really happy client, and they’re going to keep them for 20 years,” he commented.
“Once the broker knows your information, they can continue to help you every year, year in, year out, with very little work done by you, because they already know your story and the financial situation of your business.”
In our next instalment in this series we will further look into how brokers organise equipment financing for small businesses in the tree work industry.