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Impacts on Equipment Finance of NSW Construction Pause

It came as a shock and no doubt the shockwaves will roll through many areas of the economy and the population as a result. Facing rising coronavirus case numbers and stubborn figures in active in the community while infectious category, the NSW Government took the unprecedented action of shutting down the construction sector for 14 days as part of the July lockdown.

The sector awaiting nervously and hopefully for a backflip at the Premier’s Monday press conference, but this was not to come. From large infrastructure projects to small residential projects, sites were being secured until 30 July and many business owners considering what actions they needed to do to secure their business from the financial fallout.

Construction equipment finance is a major part of our business so we are fully aware of a large number of individuals and businesses that will be impacted and we are striving to assist where possible. The decision was quite unexpected as the sector had been a cornerstone in the economic recovery with multiple Government policies and measures targeted at bouncing back through infrastructure and housing projects. This strategy was further emphasised with the equipment acquisition investment tax measures introduced and expanded by the Federal Government in the current and previous budget.

Businesses have been encouraged and incentivised to acquire new equipment and many will now be faced with 14 days without working. For sole traders and owner-operators that may mean 14 days with no income. If your business is impacted by this latest decision and especially if you have current equipment finance contracts or you are in the process of finalising new equipment acquisitions we provide guidance and direction on what options are available to you in regard to relief and support.

Deferring Equipment Loan Repayments

Equipment finance customers facing difficulties in meeting repayment obligations can contact their lender to discuss the possibility of payment deferrals. Banks and lenders have come out in offering support to business customers by way of deferrals. Be mindful and ask questions re the interest charges in regard to the deferral period. Will interest be paused or will it continue to be charged? This may increase the overall cost of your loan. Deferring payments will extend the equipment finance term, meaning it will be long before the machinery is fully paid and owned.

It was noted by the Banking Association CEO Anna Bligh, that even if loan holders had received loan deferrals previously, that would not be an impediment to receiving deferrals under the current situation. It was noted by lenders in 2020 that requests for loan deferrals would not be reported negatively on a credit report. We have not as such noted a specific reference to this point at this stage, so clarification from individual lenders at time of applying could be advisable. Please click here to read more information.

Immediate Cash Flow Support

The NSW Government has a range of business financial support packages available. These cover micro-businesses as well as large scale operators and include grants, payroll tax deferrals and payments per fortnight to cover wages and other expenses.

Applicants will need to meet the eligibility criteria for each package as set out on the Service NSW website. Head to https://www.service.nsw.gov.au/covid-19 and follow the relevant links. Some packages are open for application and others open on 26 July.

Applicants need to show a downturn in turnover of 30% or more in 26 June-26 July 2021 period in comparison with that period in 2019. It does not appear to take into consideration any increase in pricing over the 2 year period and we note the 26 July does not take into account the full 14 day construction shutdown deadline to 30 July. This may mean issues in achieving the target 30%.

If your business does not meet the criteria for the government support packages, contact Jade Equipment Finance to discuss other options for cash flow support.

Reducing Equipment Finance Repayments

For those looking to reassess their existing equipment finance contracts in the light of the current pause and moving forward, our Jade Equipment Finance is ready to discuss the options we can offer through refinancing. Our refinancing services are available to both our existing Jade customers as well as to customers of other lenders including banks and non-bank lenders. Regardless of where your original loan was sourced, we can assist with refinancing quotes.

One of the primary goals of refinancing in the current scenario may be to reduce the monthly repayment level. A lower repayment may ease cash flow pressures, especially in the event that additional lockdowns and shutdowns are called in the future. Refinancing can be an effective strategy to assist in these situations by providing both a short term fix and a longer-term solution for business finance.

When considering refinancing, several aspects should be noted:-

  • Fees may apply for finalising an existing finance contract prior to the end of the agreed fixed loan term. These fees and charges can be rolled into the overall new loan (refinanced) amount.
  • The equipment would be considered as used for the purpose of refinancing and the age and condition of the machinery assessed by lenders when quoting a finance deal.
  • A different type of loan product can be selected when refinancing. We offer varying interest rates on different finance products and a cheaper interest rate product may be chosen. This may offer the business both the opportunity to achieve a lower repayment as well as to pay less interest on the loan over the refinanced term. Click here to use our equipment finance interest rate table.

Our team is available to discuss the options and source a quote to meet your requirements. Due to our business model and style of operation, we can act quickly with quick quotes and fast approvals to ensure refinancing deals are in place asap.

Processing Equipment Finance Applications at this Time

Current finance applications can proceed on schedule at this time through our Jade Equipment consultants. If a pause is required as you are unable to proceed with the purchase immediately, please contact your consultant. Requests can also be made to extend pre-approved equipment finance beyond the current lockdown period.

Contact Jade Equipment Finance on 1300 000 003 to discuss options available to address any issues you are facing in regard to your 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.

 

 

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