The end of the financial year in Australia is an important time for businesses of all sizes to wrap up the year and get ready for the next one.
While business confidence and business sentiment is up, thousands of businesses will not be planning for growth for the new financial year.
EOFY is generally a time to get financial accounts and records sorted, maximise any tax reduction and tax deduction opportunities, and plan for the financial year ahead.
That’s where an end of financial year business loan can help. Here are a few reasons to consider a business loan at the end of the financial year.
Take advantage of end of financial year (EOFY) sales
With all the sales, this time of year is like Boxing Day for businesses. Many businesses are looking to clear out their existing products and boost their sales before June 30th. Things you use in your business, such as computers, office supplies and furniture, are on sale at the end of the financial year. You can also find discounts and wholesale products for resale at this time of year, as suppliers want to clear out their stock and get ready to count their EOFY inventory.
While it might not be as fun as Boxing Day sales, your business can save some serious money at this time. You can also lower your tax bill by making these purchases before the end of the financial year.
Boost staff numbers with EOFY business finance
Typically, salaries and wages range from 15% to 30% of revenue, making them one of the biggest expenses for most businesses. While new staff will increase revenue over time, it usually takes time to make this happen. Staff need to be onboarded and trained before they can make an impact. This is a challenge for most businesses, especially sole traders wanting to move up to the next level by hiring staff. In addition, a tight labour market makes it harder to find qualified staff which has resulted in higher wages for many roles.
A business loan at the end of the financial year can help solve short-term cash flow issues that result from hiring new staff.
Maximise marketing opportunities at the end of financial year
The end of the financial year is a good time to analyse your marketing efforts over the past 12 months and make plans for the new financial year. Marketing activities could include rebuilding your website, sending a direct mail campaign, getting help with content marketing, social media and search engine optimisation, or exhibiting at a trade show.
As with hiring new staff, there will be a gap between spending money on marketing activities and seeing the financial results. Getting the right end of the year business finance can help you launch marketing initiatives for the new financial year.
Take advantage of the instant asset write-off
One big reason for seeking end of financial year business finance is the instant asset write-off which can help you at tax time. Since 2011, the Federal government has allowed businesses to get a tax deduction for the full amount of assets used for business purposes in the year they have been purchased. In the past, there was a threshold for the value of the asset to be deducted. This has since been eliminated, so you can deduct the full amount of the purchase price.
Be aware that the asset needs to be purchased, delivered and installed by 30 June of the financial year. If you do not meet these criteria, you can claim the full price in the next year’s income tax returns. Also, if you are using an asset for business and personal use, you can only deduct the part of the cost based on the percentage used for business.
Find out more about the Instant Asset Write-Off in 2022.
Acquire tools and equipment for professional service businesses
In addition to the benefits of the instant asset write-off, more professional services businesses are investing in tools and equipment to adapt to remote working.
According to IBISWorld, the professional services sector reported a sharp increase in capital expenditure on machinery and equipment following the start of the COVID-19 pandemic. Many businesses in the sector quickly adopted modern technology, particularly driven by shifts to remote working.
Smaller enterprises that were initially behind technologically, also boosted their investments in new equipment to support the transition to hybrid working.
Overcoming obstacles in getting business finance before EOFY
While there are many good reasons to get a business loan before the end of the financial year, it hasn’t always been easy. Traditional bank loans often require collateral in the form of residential or business property or other assets. If you have collateral and decide to use it for the loan, it can take weeks to get an answer on whether you have been approved. This won’t work if you need to move fast to get the funding to make it happen before 30 June.
Lumi has simplified the process for getting business loans before the end of the financial year. You can apply online in 5 minutes without harming your credit score and get funds in as quickly as 24 hours.
Check out the Lumi business loan calculator to get estimates of monthly repayments for a range of loan sizes, terms and interest rates.