As we pen this article in the first few days of October 2021, we do so with cautious optimism as we see national vaccination rates on track for somewhat of a post Covid adjusted normality returning to our communities by the end of the year.
This pandemic has in so many ways, been like a particularly bitter winter, which has claimed the lives of far too many as well as significantly damaging or destroying many businesses particularly in vulnerable industries. This time needs, in our view to be seen as just that, a bitter winter and the thing about winter is it is always followed by spring.
As we look at the overall landscape, we can see that so many projects (large & small) have been delayed and the work needed to conclude them is behind schedule, so the pent-up demand is there. This pent-up demand and the inevitable increased workloads that can be seen in the forward runways of so many businesses and industries, augers well for a particularly busy economic environment as we head into 2022. This increased level of activity will come from all sectors from all levels of government infrastructure (as they look to kickstart economic recovery) through to private projects and the many new businesses which will be created in this post bitter winter spring.
The key question here is that how many businesses are ready for the spring and if not what do they need to do to be prepared.
As our discipline is equipment finance we will restrict ourselves to this area for Comment.
What do we know
The ongoing demand for so many industries which will be wide ranging from civil to manufacturing, from transport to fit outs will be there as we, as a nation look to recover in this post Covid world. The combination of production recovery from the Covid induced delays as well as the activity created in a recovering economy will be significant.
The enormous business stimulation which has been provided and continues to be provided out to June 30 2023 by the government to encourage businesses to invest and expand via the tax incentives under the Temporary Full Expensing of Depreciating Assets (TFEDA) initiatives, represents a once in a generation opportunity. This initiative includes the ability for companies to utilise a tax carry back option, which in its most significant form has the ability for companies to receive tax refunds on company taxes paid on prior years back to 2019.
Money has never been so cheap with typical equipment finance interest rates hovering either side of 3%.
Overseas economies are starting to recover, production of machinery yellow goods including mobile cranes will increase, International freight movements will expand and so the equipment required will start hitting our shores in increased quantities.
So what do businesses need to do to be ready to upgrade and increase their current machinery equipment base?
Equipment Finance will need to be secured and should be done by obtaining the best possible interest rate as well as terms and conditions for the debt.
In order to secure the best outcomes, businesses should consider the following:-
A company showing good trading results in 2021 (ignoring any tax benefits from the government incentive), with no deferred finance payments and ATO portals which are up-to-date maximise their chance to obtain the best finance outcome on any future major equipment acquisitions.
The equipment finance process doesn’t need to be hard to navigate when you have a dedicated broker on your side, who is invested in helping you grow your business. If you’d like to know more about how you can make it work for you, speak to your Finlease Broker.
Mark O’Donoghue, CEO Finlease
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