The construction and mining sectors have enjoyed fairly busy times during the past few years, despite the impacts of the pandemic on many sectors of the economy. But a number of issues are impacting the timing of some projects which may leave contractors with the need for business finance support for their operation. These issues cover a range of factors including both domestic and global influences.
When project delays and cancellations occur without some prior and/or long term indication, they can interrupt the business plans for contractors that may have been counting on that work. Interruptions which can lead to cash flow problems which if left unaddressed can flow-on to credit issues and a bad credit rating.
Seeking support to cover cash flow shortages or stop-gap finance early, can be a smart preventative measure to a worst-case scenario. Jade Equipment Finance has the resources and finance products available to support businesses in these situations.
Potential Delays to Projects
Federal and State and Territory Governments all used their infrastructure levers to stimulate the economy during the pandemic with significant spending on new projects. The Federal Government also introduced a number of initiatives to stimulate the construction sector in particular.
But as the next waves of COVID-19 rolled in and the Government bill for support grew, so did the deficits. We are now in and approaching Government budget time and an assessment appears to be occurring.
The Federal Treasurer is set to announce an increase in infrastructure spending in the 22/23 Federal Budget. While encouraging for some, be mindful that these works may not happen for some time as the Budget needs to be passed by Parliament, doesn’t come into effect until 1 July at least and the Federal Election may result in changes to the Budget.
The NSW Government has been a big-spender when it comes to infrastructure investment in recent times. A number of huge projects have been commenced in recent years creating jobs and work for many contractors. But reports in the media are that some of these projects may be facing delays. Delays which are being put down to increased costs and other impacts.
The specific projects named include the Parramatta Light Rail extension and the much-anticipated and in some circles controversial Norther Beaches Link. Reports have the Infrastructure and Cities Minister Rob Stokes saying the state’s major projects are under review. Funding via the Federal Budget for NSW projects has been flagged but the Minister reportedly said there are other issues to consider.
The recent and continuing flood and heavy rain impacting the eastern seaboard will also cause delays to many projects – both in the private residential sector and in the infrastructure space. However, there will be a huge demand for recovery and construction work once the weather settles.
The Home Builder scheme delivered returns to the building sector with work for many trades and suppliers. The popularity of the scheme and the ensuing demand has led to shortages in supplies and materials. Materials shortages are being felt across many sectors and causing projects to be delayed.
Another impact to be considered is the surge in inflation and rising costs of materials. This puts pressure on quotes and estimates and if increases to say the customer are required, it may result in a postponement or pause in work.
Potential Delay Impacts on Contractors
Delays to projects can create significant problems for contractors that were depending on that work. Without the work or at least some of that work, especially for small sole trader operators, there is no income and that means no capacity to meet expenses.
Finance Support for Business
Despite the potential for a poor outcome to develop, we do provide a range of finance solutions to support businesses deal with project delays and the ensuing delays in income.
Business Overdraft is a very versatile and flexible facility which we source and tailor to meet the specific needs of our customers. This can be an extremely useful facility to cover short-term or intermittent cash flow shortages. One of the great attractions of an overdraft is that businesses only pay interest on the funds drawn upon. An overdraft amount is established and can be used in whole or part. Interest is charged by the lender only on the part which is used.
While banks are the traditional sources of overdrafts, we have accreditation with non-bank lenders that also provide this facility at extremely competitive rates. And our consultant will handle all the negotiations. A vital stage which saves our customers those sometime difficult conversations.
Business Loans both secured and unsecured are also available. These loans can be secured for a wide range of purposes.
Insurance Premium Funding is worth keeping in mind if a business faces large annual premium on key equipment. Finding the entire amount when due can be challenging when the pipeline of work is compromised. This funding facility allows for the premiums to be paid in instalments.
Refinancing is a strategy to consider where longer term issues may be foreseen. A review and restructure of a business’ commitments and refinancing of those obligations may be an extremely workable and cost-effective solution.
Delays in work flow in many industries is unfortunately in many cases unavoidable. What is avoidable is dealing with the negative financial fall-out. If your business is or may be subject to delays in work flow for whatever reason, reach out to us to discuss the solutions we can offer to support the business.
Speak with a Jade Equipment Finance consultant on 1300 000 003 to discuss business finance solutions
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.