For the majority of small business owners in Australia, the sooner the end of financial year (EOFY) is over, the sooner life gets back to normal. But tax time, while often busy, can present a great opportunity to get ahead for the upcoming financial year, make strategic investments and review your cash flow requirements.  

The holy grail: Steady cash flow 

Maintaining short-term cash flow is the most common reason given by small businesses for seeking finance, according to the ABS. To kick off the new financial year with a positive cash flow, some small business owners look to a small business loan to solve some of the challenges that arise at this time of year, and to take advantage of opportunities for growth. 

Here are some of the ways that small business owners are benefiting from small business loans at tax time: 

Inventory purchases 

On average, 24% of Prospa lending is used for inventory purchases, according to Prospa’s Economic Impact Report. However, there are several benefits to purchasing your inventory at EOFY, including:  

  • Taking advantage of any end of financial year sales offered by your suppliers. 
  • Placing your orders ahead of potential or known price increases. 
  • Purchasing stock in a timely manner to ensure delivery for the spring/summer season. With the quieter winter season, having additional funding in place also helps with seasonal fluctuations, especially in the retail sector.  

If your small business allows you to buy stock in bulk that you could resell if required, purchasing inventory at EOFY using a small business loan could also be an opportunity to increase your profit margins.  

Equipment purchases  

Whether it’s a coffee machine or a vehicle for your farm, investing in new equipment can be the difference between a good day and a wasted one.  

If it’s time for an upgrade, end of financial year could be an excellent opportunity to do so, as the ATO recently increased the cost of assets that can be instantly written off to $30,000, while extending the threshold to medium-sized businesses and the period to 30 June 2020. 

That means if you purchase assets for your small business before EOFY, you may be eligible to immediately claim a deduction from the business portion benefit. Find out how your small business can benefit from the $30k instant asset write-off and speak to your financial or tax advisor to see if you qualify. 

“There are a number of reasons I use loans to fund equipment purchases,” says Vivien Munoz-Ferrada, Director at Canada Bay Medical Imaging.  

“Firstly, so as not to tie up my cash flow, secondly to assist with tax write-offs and thirdly as I find it easier to make regular payments on a loan than save up for large cost asset purchases.” 

If you qualify for the $30k instant asset write-off and new equipment might help your business stay competitive or provide better services, opting for a small business loan could be a smart strategy to help you maximise the $30k instant asset write-off scheme.  

Consolidating debt 

What could be better than dealing with all your debts and starting a new financial year afresh? Consolidating all your outstanding debts into one payment not only helps your cash flow but also keeps suppliers happy. And happy suppliers are vital for lasting business relationships. 

By seeking finance to help consolidate your debts – especially chunky items like income tax and Business Activity Statements (BAS) – you could be in a much better place for the coming 12 months. But first talk to your financial advisor for advice that suits your individual situation.  

Rapid growth 

For many small business owners, EOFY is a time to review expansion plans and generate new opportunities. So perhaps it’s unsurprising that 57% of Prospa customers have used a portion of their most recent small business loan for working capital.  

As the financial year draws to a close, take a look at your business results based on using your existing cash flow, and think about how those results might improve with a small business loan. Consider too how additional funding could impact not only your day-to-day cash flow, but the long-term profitability of your business. 

Small business loans can help businesses at different stages of their life cycle and across a range of industries. Having a solid financial plan in place will help you identify your business needs and reveal how a loan could elevate your business.