While we like to think ‘we’ve got this’ when it comes many aspects of our business, when it comes to the rising prices of some goods and services, we ‘don’t have this’! The factors driving prices are outside of the control of most of us and we are at the mercy of the market. Or are we? While you may not be able to set the price at the pump or the check-out, business owners have the lever of cheap equipment finance on new machinery or refinancing to offset the impact of cost rises to their operation.
The devastating floods in Queensland and NSW have the potential to cause increases in food produce prices over the coming months. Fuel prices are already spiking and expected to continue due to the war in Ukraine, while inflation in Australia is spiking as the economy recovers from the coronavirus pandemic. In addition, COVID-19 has added new expenses for many businesses in meeting local state requirements and for some it’s the added cost of regular RATs.
Rising prices of many goods and services can impact household budgets. When it comes to business, increased expenses can mean a major hit to the bottom line. This can be especially felt by operators on fixed price contracts and a double whammy for owner-operators and sole traders where business turnover and personal income can be closely tied.
Leveraging equipment finance repayments to offset these rising expenses is a tool at the disposal of many businesses. We lay out some of the options we can offer to businesses acquiring new equipment and to refinance existing finance arrangements to achieve the objective of reducing outgoings.
New Equipment Acquisitions
While it may appear counter-productive to consider purchasing new machinery or equipment while trying to keep costs down, that may not be the case. Equipment manufacturers continue to launch new models which focus on achieving greater fuel efficiency and improved productivity. Factors that can assist businesses achieve a better bottom line.
Upgrading inefficient and ageing machinery which is constantly breaking down or requires expensive maintenance can be an astute move towards addressing cost pressures in other areas.
Securing cheap equipment finance to acquire that machinery can be pivotal in keeping costs under control over the long term. Interest is the key component of equipment finance and securing the cheapest finance deal is key to the lowest repayments.
The RBA has kept the cash rate steady at the historic low of 0.1% since November 2020 making business finance, as the Governor of the RBA Philip Lowe puts it, very ‘accommodative’. While the primary focus of Jade Equipment Finance is always to achieve better interest rates for our customers, the current low interest rate climate has assisted us even further in this regard.
While the RBA has said for some time that conditions for a rate rise were looking likely to be in place around 2024, the inflation rate and falling unemployment figures increasingly point to an earlier rate rise. Possibly in 2022.
So acquiring new equipment with the cheapest finance now at a fixed rate, can provide the business with a buffer against rate rises as well as cost increases. We secure equipment finance at a fixed interest rate in order to provide our customers with certainty over the full term of their finance. Fixed interest rates for equipment finance are fixed for the full, up to 7 years of the contract.
To fully appreciate what even a small incremental increase in interest rates can mean to costs for your business, refer to our Equipment Finance Calculator. By leaving all data the same and changing the interest rate slightly, you’ll immediately note the difference in the estimated repayments. Achieving the cheapest interest rate ensures the lowest monthly repayment which means keeping outgoings on budget.
Refinancing to Reduce Outgoings
For businesses with existing equipment and machinery finance, refinancing to achieve lower monthly repayments may also present an effective tool to offset rising costs of other supplies and materials. Refinancing involves establishing a new finance arrangement to replace an existing loan. It can also be utilised to combine several loans into the one loan to streamline repayments.
The credit profile and/or financial position of the business may have improved significantly since the current loan was established. This may result in better loan conditions and a better interest rate.
Our consultants work with each of our customers individually to structure a refinanced arrangement which is tailored to achieve their specific objectives. If reducing regular outgoings is the key objectives, then achieving a new finance arrangement with lower repayments may be the goal.
The refinanced equipment loan may be arranged with the preferred finance product. It may be the same loan type as the existing finance arrangement or a different product. The selection includes Chattel Mortgage, Lease, Commercial Hire Purchase and Rent to Own.
The new loan may be sourced from the same lender as the existing finance or from a different lender. Jade Equipment Finance is accredited with a wide range of lenders including specialty non-bank lenders that can be extremely flexible and open to negotiating with our consultants in regard to rates and loan conditions.
Refinancing involves paying out the existing loan and that may process may attract fees and charges from the lender which will need to be considered in regard to the overall cost-effectiveness of the process. The condition of the equipment also needs to be considered. The refinancing would be on used equipment which can attract a different interest rate and loan conditions to new equipment finance.
You’ve Got This!
So if rising prices of goods and services is placing undue pressure on your business cash flow, perhaps it’s time to say ‘I’ve got this’ with cheaper equipment finance to reduce outgoings and improve your bottom line.
Contact Jade Equipment Finance on 1300 000 003 for cheap equipment finance.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.