Australian SMEs boost investment in green assets

Despite rising interest rates and economy woes, Australian small to medium-sized business owners have stepped up spending on new assets for their businesses in the last 12 months, especially in vehicle and equipment purchases, said the Commonwealth Bank of Australia (CBA).

The bank’s figures show SME vehicle and equipment financing has risen by 22 per cent compared to the same period last year, with a significant chunk of that spending on energy efficient assets.

According to CBA, investment in electric vehicle fleets were up more than threefold (325 per cent) in the last year while hybrid motor vehicles were up 120 per cent.

Small businesses are leading the way on this front, leveraging CBA’s Green Vehicle and Equipment Finance, with electric vehicle financing up 346 per cent in the sector, the bank added.

Manufacturers are also stepping up their investment in new assets, with a 24 per cent jump in funding of manufacturing and industrial equipment such as manufacturing lines, forklifts, and scissor lifts.

Funding activity has been particularly strong among regional manufacturers and agribusinesses (up 42 per cent year-on-year), led by purchases on moulding machines, packing and cutting machines, silos and other food manufacturing machinery.

CBA’s Executive General Manager of Business Lending, Grant Cairns, says the increase reflects post-COVID business growth as well as businesses evolving their models to invest in energy efficiency improvements.

“Business confidence remains strong despite economic headwinds from higher rates and inflation, and we are seeing growing investment in assets across agriculture and manufacturing, supported by an improved supply chain landscape in a post-COVID world,” Cairns said.

“Companies are also stepping up investment in the energy transition, with more businesses looking to improve their energy efficiency through equipment upgrades or the increased adoption of electrified transportation and replacement fleets.

“Part of this shift is driven by customers taking advantage of government rebates and subsidies and looking at longer term actions to reduce costs and demonstrate returns on investment.”

Cairns said small businesses were continuing to maximise their cashflow through asset financing, and expects this to continue, especially in light of the Federal Budget measures announced earlier in May.

“We welcome the extension of the Federal Government’s instant asset write-off scheme (IAWO) as a way to help free up cash flow for small businesses,” he said.

“As small businesses lean into the energy transition – as evidenced by the sharp increase in green asset financing over the past year – government support such as the IAWO could help propel this trend.”