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Tips to manage loan repayments

Posted on by rdelavictoria

Safeguarding your business finances: managing your business loan repayments effectively

With banks tightening of lending standards in today’s economic climate, are you looking for ways to
better manage your existing business loan repayments and business financing?
Securing a business loan empowers businesses to grow, hire staff, replace equipment, and expand
into new markets. While securing a business loan is a significant step towards growth, managing
your loan repayments effectively is essential to avoid financial pitfalls.
In this article, we share actionable tips and strategies to ensure that your business loans and
monthly expenses are managed in a cost-effective and efficient way.

1. Analyse your cash flow

When entering a commercial finance, business finance, or vehicle finance agreement, a crucial step
is to develop a comprehensive plan. Set aside money for monthly repayments and prioritise it in
your budget above less critical expenses. Unnecessary spending can lead to budget overruns,
potentially leaving you short of cash for essential bills and expenses. Keep a close eye on your typical
monthly transactions and expenses.
Additionally, to ensure a healthy cash flow, you could incorporate a profit and loss forecast to
project income, costs, and profits over the loan term. This forward-looking approach ensures your
business can confidently meet financial obligations, including loan repayments, throughout the loan
term, enhancing long-term financial stability.

2. Streamline your repayment schedules for efficiency

When managing business loans and monthly expenses, streamlining your repayment schedules can
lead to significant cost savings. Consider asking your broker to align the repayment dates with your
cash flow cycles, which can reduce financial strain.
Efficiency in your repayment strategy can help you make the most of your business financing while
ensuring your monthly expenses remain manageable.

3. Adjust your repayments based on actual revenue

Running a business can sometimes mean fluctuations in your incoming revenue, influenced by
various factors such as changes in market demand, economic conditions, competition, and internal
business operations.
Regularly review your cash flow to accommodate these fluctuations in revenue and unexpected
expenses. In slower months, you may want to consider reducing business expenses temporarily to
ensure you can make loan payments, or top-up on your repayments. When your revenue exceeds
expectations, it could be worthwhile allocating the surplus to loan repayments or reserve it for
future obligations.

4. Track your spending

Good record-keeping is another effective way to stay on top of your finances and repayments. It
enables you to make easy adjustments based your loan repayment strategy and priorities. You can
maintain separate business accounts, organise receipts, use spreadsheets or accounting software,
and consider working with an accountant if needed.
A valuable way to help you prioritise your records could be implementing a color-coded system:

  • Non-negotiable payments (red): These are top-priority expenses, such as loan repayments and
    staff salaries. Allocate funds for them in advance to avoid financial strain.
  • High-priority payments (yellow): These crucial but flexible expenses, like business travel and
    client meetings, should follow non-negotiable payments in your budget.
  • Lower-priority payments (green): Adjust expenses such as team outings and training, as they
    are less critical.

5. Maintain open communication with your broker

Building a lasting relationship with your broker is essential in the world of business lending. To foster
a strong, long-term partnership, be forthright, especially when dealing with streamline or no doc
loans.
Typically, when a small business owner or a self-employed individual needs access to finance, but
lacks the required documentation, then streamline or no doc business loans are ideal to gain access
to needed capital. These loans offer similar terms to regular business loans, but don´t require the
same number of financial statements, documents or other paperwork traditional loans require.
While low doc or no doc business loans may appear tempting to avoid mountains of paperwork, it’s
still important to thoroughly crunch the numbers, ensuring that you can comfortably meet your
repayment obligations. Additionally, conducting your own research to gather insights from other
brokers or lenders on alternative loan options is a wise step to make informed financial decisions.

6. Secure business finance wisely

Finally, when seeking business finance via any broker, ensure you secure a sound and beneficial
arrangement. Begin by defining your needs clearly and assessing your budget to determine what you
can comfortably allocate.
Next, shop around for multiple options, understand the terms and conditions, and consider potential
tax implications. Plan for contingencies and align the financing term with the expected lifespan of
the vehicle or equipment. Seek professional advice if needed. For example, with Metro, they can
easily tailor finance terms based on your needs, whether you are buying brand new or replacing an
existing asset.

 

Metro is an independent Australian non-bank lender specialising in auto and equipment finance for
businesses, car finance for consumers, and novated leasing. Excelling in customer service and offering highly
competitive rates, Metro (metrofin.com.au) is one of Australia’s most popular non-bank commercial asset
finance lenders. Feel free to speak with a Metro broker today to explore the available options for your
business.

Common misconceptions about novated leases

Posted on by rdelavictoria

Novated leases are a great way for individuals to lease – and eventually purchase – a car salary packaged
through their employer.

However, there are plenty of misconceptions and myths around novated leases, leaving many people asking, ‘Are they worth it?’ Whether you’re seeking a novated lease through your employer or are a business owner considering offering novated leases to your employees, there are plenty of benefits to signing a Novation Agreement.

Myth number 1: They are only available to businesses.

Novated leases are one of the most cost-saving car loans available to individuals. Many people falsely believe that novated leases are for business use only. In fact, they are an agreement between the employee and employer and can be used by other members of the employee’s family, as long as they are covered by insurance. Whether you’re looking for a new = or = second-hand car, novated leases are available for a wide variety of vehicles.

Myth number 2: It is expensive.

There is a common misconception that novated lease providers charge a premium for the cost of the car. This is incorrect. Consumers can access more competitive prices if securing a car through a fleet provider, who negotiate better deals thanks to their strong relationships with manufacturers as they purchase large numbers of vehicles each year. In addition, because the monthly repayments and running costs come out of the employee’s pre-tax dollars, the employee saves on these costs throughout the life of the lease.

Myth number 3: There is a lot of administrative work.

For businesses reluctant to offer novated leases to their employees because they think that it will cost them time in paperwork and administration, one of the best parts of a novated lease is that the agreement is managed by a third party. It is a simple and hassle-free process. Once a business sources a novated lease provider, they simply need to notify their employees that novated leasing is part of their salary package offering and ensure the payment is deducted from the employee’s salary.

Myth number 4: Only high-income earners will benefit.

There is a common misconception that only those who earn large salaries can benefit from a novated lease, but the truth is far from that.

Employees earning from around $60,000 to six-figure salaries who are interested in taking out a car loan can use a novated lease to help stretch out repayments and choose another vehicle at the end of the lease term or pay off the residual amount to purchase the vehicle outright.

Metro offers salary packagers and their clients a range of long-term novated leases, ranging from 12 to 60 months. Furthermore, employees can also salary package their registration, insurance, on-road costs, vehicle maintenance, and fuel card. Regardless of how little or how many kilometres they drive, there are plenty of benefits.

Is Australian SME growth hindered by under investment in capital?

Posted on by rdelavictoria

About the study

METRO CAPITAL COSTS HINDER GROWTH PDF

Metro commissioned a survey of 200 business owners to find out if and why
businesses are being held back from acquiring capital assets that will help grow
their businesses further.

Metro surveyed business owners across the full SME spectrum: micro (1-15
employees), small (16-50 employees) and medium (51-200 employees), and large
sized business (more than 200 employees).

Respondents were asked whether a lack of capital assets or capital assets that are
too old, were holding their business back from growing.

Respondents were then asked to identify a cause as to why their businesses are
being held back from acquiring capital assets. The reasons presented were:

  • Can’t afford it.
  • Can’t get a loan.
  • Don’t want to get a loan.
  • Don’t want to invest in capital assets at this stage.
  • The prices of equipment and vehicles have increased too much.

Respondents also had the option to say that nothing was holding them back from
acquiring capital assets or that they weren’t growing their business at this time.

The survey respondents matched the geographical and population spread of the
Australian population.

Is a lack of capital assets holding businesses back?

Two thirds of business owners admit that a lack of capital assets or assets that are
too old are holding them back from expanding their business.
More than two-fifths (42%) of respondents said they need more capital assets (such
as operational equipment, vehicles and computer hardware) to grow their business,
followed by 26 per cent that said their assets are too old and need to be updated.

Is a lack of capital assets holding your business from
growing further?

By State.

Almost half (46%) of NSW businesses stated that they would need more capital

assets to grow further. This was followed by:

  • 44% of respondents from Western Australia
  • 41% for respondents from Victoria
  • 41% of respondents from Queensland
  • 27% of respondents from South Australia

Furthermore, two-fifths (40%) of South Australian businesses said their capital
assets are too old and need updating. Thirty-eight (38) per cent of businesses in
Western Australia said the same, followed by 26 per cent of Victorian businesses, 25
per cent of businesses in NSW and 19 per cent of businesses in Queensland.

Is a lack of capital assets holding your business back from
growing further?

By business size.

Across business sizes, more than half (55%) of medium sized businesses need capital
assets to help grow further. This compares with only 46 per cent of small businesses,
followed by 44 per cent of large businesses and 34 per cent of micro businesses.

Thirty-nine (39) per cent of small businesses surveyed said that aging and obsolete
capital assets are to blame for stagnant business growth. This is followed by almost
a third (30%) of medium-sized businesses, 22 per cent of large businesses and 18 per
cent of micro businesses.

Almost half (48%) of micro businesses do not require capital assets to support their
business growth. This is followed by:

  • 34% of large businesses
  • 15% of medium-sized businesses
  • 15% of small businesses

Is a lack of capital assets holding your business back from
growing further?

What is holding businesses back from acquiring
capital assets?

The most common factor that is preventing businesses from acquiring capital assets
is the increased price of equipment and vehicles, with almost a quarter (22%) of
respondents saying so. Almost a fifth (19%) of businesses said they can’t afford
capital assets at this time and 15 per cent don’t want to invest at this stage.

More than a quarter (27%) of respondents said that nothing is holding their
businesses back from acquiring new capital assets to expand.

Reassuringly for finance lenders and businesses, only 3 per cent reported being
unable to secure a loan to support their business growth.

By State.

A third (33%) of South Australian businesses said the increasing price of equipment
and vehicles was preventing them from acquiring capital assets. A quarter (25%) of
West Australian businesses reported the same, followed by, 23 per cent of NSW
businesses, 19 per cent of Queensland businesses and 18 per cent of Victorian
businesses.

The study found 31 per cent West Australian businesses are unable to afford capital
assets. This was followed by:

  • 22% from Queensland
  • 18% from Victoria
  • 15% from NSW
  • 14% from South Australia

Almost a third (31%) of NSW businesses said they were not held back from acquiring
capital assets and can acquire them when needed. This compares with 26 per cent
from Victoria, 24 per cent from Queensland, 20 per cent from South Australia and
20 per cent from Western Australia.

Twenty (20) per cent of Victorian and South Australian businesses said they don’t
want to invest in capital assets at this stage. This is followed by Queensland and
NSW, at 14 per cent. Six (6) per cent of West Australian businesses reported that they
don’t want to invest in capital at this stage.

What’s holding your business back from acquiring
capital assets?

By business size.

A third (33%) of medium-sized businesses reported that equipment and vehicle
prices have increased too much. This compares with a quarter (26%) of small
businesses, followed by 22 per cent of large businesses and 15 per cent of micro
businesses.

Micro businesses are most likely to report being unable to afford acquiring capital
assets, with almost a third (29%) saying so. This compares with:

  • 13% of small businesses
  • 9% of medium-sized businesses
  • 9% of large businesses

Almost half (44%) of large businesses face no hindrance in acquiring capital assets
as needed. This compares with 27 per cent of small businesses, 23 per cent of micro
businesses and 22 per cent of medium-sized businesses.

 

Which type of asset finance suits your business best?

Posted on by rdelavictoria

Having the right vehicles and equipment is vital to the success and longevity of any business, helping to maximise efficiency and productivity while maintaining a competitive edge.

However, funding the up-front purchase of expensive cars, trucks and other equipment is not always feasible. That’s why specialised finance for such assets is so popular. It enables businesses to put their new acquisitions to work immediately without draining their cash reserves or incurring the high interest rates of other credit options.

Below, we explore three of the most popular forms of business financing for capital assets.

Commercial Finance Agreements

Commercial Finance Agreements, also known as chattel mortgages, are a fast, flexible way to take ownership of assets such as cars, trucks, trailers, and other construction and earthmoving equipment.

A lender provides the funds to purchase the vehicle or equipment, and the borrower takes ownership at the time of purchase. The lender uses the asset financed as security, so interest rates on commercial financial agreements are usually significantly lower than those of unsecured facilities such as cash flow-based loans.

A range of terms are available, so repayments can be structured to suit each business’s unique needs. They are typically paid over 2 to 5 years, and can be set at a regular monthly amount, or customised to fit your unique cash flow requirements. A larger one-off balloon payment can also be set at the end of the term to help lower the regular instalment.

With a Commercial Finance Agreement, the lender pays the goods and services tax (GST) as part of the purchase cost, whereas the business which owns it is entitled to claim an input tax credit up front. The business can also claim interest and depreciation costs, depending on the extent to which the asset is used for business purposes.

Finance Leases

Finance Leases provide businesses with use cars and other vehicles, and equipment without taking ownership of them. In this form of business financing, a leasing company (referred to in legal terms as the lessor) buys the asset and gives the use of it to a business or person (the lessee) in return for regular payments.

Finance Leases typically run for 2 to 5 years and are widely used for vehicle finance. They are particularly suitable for businesses that use their vehicles primarily for business-related purposes and turn them over regularly, such as vehicle fleet companies.

Unlike a car loan, when a Finance Lease comes to an end, businesses may be presented with a range of options including renewing the lease, choosing to purchase it outright by making a final payment, or trading it in for a new model and continuing with a new lease agreement.

There are no annual or account-keeping fees associated with this finance option. Lease repayments for business vehicles are generally 100% tax deductible, GST on lease payments may be able to be claimed*, and it may be possible to make lease payments in advance for tax deduction purposes.

Novated Leases

Another alternative to a car loan is a Novated Lease, which instead of leasing vehicles to the business owner, enables employees to finance a new or used car by paying for it out of their pre-tax income. This is a tax-efficient form of salary packaging known as salary sacrificing.

This form of vehicle finance usually runs for 1 – 5 years, and is based on a three-way agreement whereby an employer agrees to make car lease payments to the finance company by deducting them from an employee’s salary. The vehicle may be used as part of a business arrangement, or it could be entirely for personal use.

For the employee, a Novated Lease can be a cost-effective way to secure the use of a car, not only because of the income tax savings but it can also include running costs such as fuel, servicing, registration, and car insurance in the repayments deducted from their pre-tax salary.

For the employer, it’s a low-risk way to help attract, retain and reward valued team members without the business having to take on new liabilities or manage a vehicle fleet. If the employee quits, the responsibility for making alternative arrangements with the finance company lies with the employee.

To learn more about the asset finance options available to your business, speak to an accredited Metro Finance broker today.

*Before making any investment decision, consider consulting your accountant or seeking independent financial advice.

 

How asset finance can help you manage your cash flow

Posted on by rdelavictoria

Cash flow is the lifeblood of any business. It’s essential for day-to-day operations, and the key to long-term growth. So when investing in new assets, it makes sense for businesses to choose finance solutions that can minimise disruptions to their cash flow.

Rather than tying up large amounts of capital by paying cash up front for big-ticket items, businesses can instead use facilities such as commercial finance agreements and leases to secure the use of the vehicles and equipment they need, preserving their liquidity to meet expenses or take advantage of new opportunities as they arise.

Asset finance is also a great solution for businesses that have the potential to grow but don’t have enough cash on hand to fund an expansion. It allows them to take possession of new income-producing assets and put them to use generating returns immediately.
This form of business financing may also open the door to higher-quality equipment than a business can’t afford to pay cash for. Therefore avoiding the need to compromise on important features and enabling businesses to upgrade their assets to the latest models and technology more frequently.

Repayments are made over an extended period (typically 1 – 5 years), which more accurately reflects the useful life of the asset, instead of a lump-sum payment up front. Instalments can be fixed at the same monthly amount or can be structured to fit each business’s unique cash flow requirements, while a balloon payment can be set at the end of the term to lower regular monthly outgoings. Plus, repayments are usually partially or entirely tax-deductible.

One example of the finance solutions businesses can use to quickly take ownership of cars, trucks and other equipment and get moving without big cash outflows is a Commercial Finance Agreement. Also known as a chattel mortgage, this is a form of lending that can be used to acquire passenger and commercial vehicles, whether new or used and from a dealer or through private sale, as well as construction, earthmoving or other equipment.

An alternative to Commercial Finance Agreements is a Finance Lease. In this case, a finance company purchases and remains the legal owner of an asset, and then effectively rents it to a business for a regular payment over an agreed period.

At the end of the agreed lease period, there may be a wide range of options available to the business leasing the vehicle or other asset: they may choose to refinance it for another term, to take ownership (after paying any residual value) or to replace it with a new leased vehicle.

To learn more about the asset finance options available to your business, speak to an accredited Metro Finance broker today. Before making any investment decision, consider consulting to your accountant or seeking independent financial advice.

 

Metro Completes A$67 Million Equity Raise to Turbocharge Growth Ambitions

Posted on by rdelavictoria

Metro, one of Australia’s leading independent non-bank lenders for commercial asset finance, today announced the successful completion of a $67 million institutional equity placement.

The placement will also provide Metro with the ability to pursue possible strategic acquisitions that will bolster its distribution networks and technology capabilities.

Commenting on the announcement, Chief Executive Officer Phillip Crossman said it was an exciting time for the business and the equity injection would enable it to accelerate expansion plans.

“Today marks an important milestone for Metro as we prepare to embark upon a new phase of growth. This will see us tap into new markets, unlock additional distribution channels, pursue opportunities within our strategic focus areas, and augment our existing capabilities across the entire business.”

While Metro’s core business continues to be commercial lending, the company expanded into novated leasing and consumer auto lending in 2021 and 2022 respectively.

The lender today settles approximately A$150 million in loans per month, or A$1.5-2 billion each year, servicing more than 50,000 customers and originating loans via its national network of around 4,000 auto and equipment brokers.

“At Metro, we pride ourselves on delivering exceptional service and outcomes to our customers. By taking a uniquely personalised approach to lending, and due to our continued investment into our technology stack, we’ve been able to help keep Australian businesses and consumers moving efficiently, despite challenging economic conditions”.

“We’re excited for the future, and this latest injection of equity ensures we are well positioned to continue supporting our customers and distribution partners,” Phillip added.

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