EOFY REPORTING is not just about minimising tax

Tightened credit conditions for small businesses increases the importance of debt reviews and smart planning.

The 2018 financial year is done and the results are in, but before the financial reporting is locked down, it’s worth considering whether tax minimisation is the only criteria to apply.

In a tightened credit environment, it’s more important than ever for small businesses to be monitoring short- and long-term debt requirements, and how banks are assessing the financials.

The main short-term outcome of the banking Royal Commission is strict policy adherence. “Where leniency was often applied to common sense situations, the banks have all had to start toeing the line on whatever their policy states,” Surfcoast Life and Lending’s Lanie Conquest said.

“For the big banks, it’s often pretty black and white as their policies are very specific.

One big bank recently declined a small business owners’ home loan application based on only having been in business for 1 year and 11 months, against a policy of two years. Other banks have removed some of their products, such as bridging loans and lines of credit, whilst they overhaul their policies in light of recent scrutiny.”

It’s not all bleak, though. Non-banks and second tier lenders are taking the opportunity to promote their common sense approaches, and actively targeting areas where they believe taking a risk position is warranted.

“How depreciation is treated by lenders is a critical one for our small business clients, and the policies are wide and varied,” Ms Conquest said.

“We’ve got some lenders only accepting 20 per cent of the expense write-off, while others will allow the full 100 per cent. It can make a huge difference to the amount of funding the business and its owners can access.”

She suggests that this is the exact time of year business owners need to be assessing their short and long term debt requirements.

“In the main, lenders are primarily focused on surplus cash, and accountants are expected to minimise it. It creates a natural tension that needs careful planning. Being on the front foot with how a scenario is presented to a lender saves so much heartache, and ultimately, dollars.”

Contact Lanie Conquest by phoning 0418 938 646, emailing lanie@ surfcoastlending.com.au or heading to surfcoastlifeandlending.com.au.