BUSINESS, FINANCE & ACCOUNTING
Business feels rates bite
By Colin Cooper, Director, Australiawide Finance
A
determination to control inflation with rising interest rates is changing the financial outlook, says Colin Cooper, director of Australiawide Finance. There are strong signals that higher interest rates are biting. A sharp downturn in asset purchase finance and increased enquiry for non-specific business finance likely reflects slowed business conditions and the higher costs of doing business. In its recent Quarterly Commercial Insights report, credit bureau Equifax noted that asset finance (vehicles and equipment) fell 9.1% in the second calendar quarter of 2022 compared to the same period in 2021. Business loan (non-specific funding) applications rose by 2% in the same measure. Some of the change in asset finance may be reflected by supply chain issues, with a long and not yet reconciled build-up of unfulfilled orders. Business finance needs are more likely to be in response to slowed conditions caused by a lack of labour and pushing results all the way through to extended payment times. The strongest evidence of the slowing economy is the recent reversal of the emphasis on rate rises – from sharp, quick and regular increases at little notice, to a strong willingness for lenders to compete hard and discount rates for quality business. Most banking contacts report that rate markets are settling and loan application turnaround times have reduced sharply. Temporary full expensing What does ‘temporary full expensing’ mean? In simple terms, it potentially
means a very large tax deduction or a refund! Business assets, installed and ready for use by 30 June 2023 can be written off in full (instead of depreciating over a number of years). There is no limit to the number of assets, no ceiling to the amount of any purchase and it is available to a business with an aggregated turnover up to $5 billion. A temporary full expense writeoff can cause a tax loss for the year which may result in a refund of taxes paid in previous years. These arrangements, which came about as the result of pandemic provisions to stimulate the economy, will end on 30 June 2023 and we are unlikely to ever see them again Interest rates and credit approval We continue to see new entrants to asset lending, with access to wholesale funds and the scope to lend across a wide range of industries. Vehicles and wheeled goods typically attract the best rates but we also see manufacturing and warehouse equipment financed at similar rates by lenders who have the confidence to use industry expertise to fill niches. Financiers are moving fast toward automated application assessment criteria, which results in quick responses but can have unintended consequences. Because the lending market is fragmented into niches, it’s imperative to go to the right lender with the right information - it’s now less likely your application will be viewed by a human. The best method to obtain the best finance is to consult an industry
Colin Cooper, Director of Australiawide Finance
expert. You may be surprised at how quickly and economically you can finance equipment, preserving cashflow and helping grow your business. Use our industry expertise and contact us if you seek access to vehicle and equipment lenders with great
rates and quick approval times. australiawide Finance austwidefinance.com.au
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42 | Industry Update Issue 127 August / September 2022
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