With construction activity contracting and a global recession probable, assess the effectiveness of commercial loans and seek better solutions at cheaper rates.
The Australian economy was the standout on the global stage with its remarkable bounce back and recovery following the peak of the pandemic. But it didn’t take long for inflation to start rising and rising and rising and the RBA
to step in and hike interest rates and the outlook to deteriorate, especially globally.
The Governor of the RBA, Philip Lowe has been commentating for several months on the uncertainty surrounding the global economy. This can be seen in daily finance news headlines with what is happening in the UK and the USA and as a result of the ongoing war on Ukraine.
Domestically, Treasurer Chalmers says the chances of a recession on a global basis is now probable, but he does remain optimistic for Australia. Supply chains continue to disrupt many industries along with ongoing labour shortages. Specific sectors are experiencing notable issues with the sectors of the construction industry recording their fourth month of contraction.
Whether a worst case scenario ends up playing out or not, business owners can consider addressing commercial loans and cheaper equipment finance as a means of mitigating some of the risk factors. This may include an assessment of current loans and/or sourcing cost-effective finance to invest in equipment and vehicles to place the business in a better position moving forward.
We update on the latest construction activity report and the solutions we can provide to business to support them during both the best and the possible worst of economic times.
Activity in Construction Contracting
The release of the September PCI (Performance of Construction Index) report
shows that the two residential sectors – house and apartment building, have in ‘deep contraction’. September represents four months of sector contraction and in comparison with the August data, the actual rate of the contraction has increased. Activity in commercial has improved and in engineering it is stable.
The strongest result for new orders were in commercial. Demand pressures including rising interest rates and the level of uncertainty that is prevailing in regard to the outcome, are given in the report as reasons for the current downturn. This is especially evident in the decrease in enquiries for new orders that apartment and home builders are receiving.
The report notes the challenges that the sector is facing on the supply front with supply chains still inhibiting growth but there are signs of that situation starting to ease. Employment is also improving.
According to Peter Burn, Chief Policy Advisor, increased interest rates are having a negative effect on the residential building sectors. He noted that in the months ahead, the sectors would likely feel the ‘lag effect’ of the latest rate rise on new orders. But Mr Burn did provide some optimism in noting how the RBA had slowed down the actual rate of its cash rate increases. (The October cash rate rise was 0.25% after four months of 0.5% rises).
A large pipeline of work has been accrued by many builders, according to Senior HIA Economist Nicholas Ward. He said this was due to the build-up during the pandemic so it could take some time for the weaker levels of demand to actually translate to a fall in activity at site level.
Commercial Loan Options
Individual businesses will need to assess their own operation against the broader economic outlook to arrive at a decision as to what they require to stabilise their own situation and place the business in the ideal position to forge ahead. Business Finance assists businesses with a full range of commercial loans and finance to target specific needs as well as general requirements.
Investing in new machinery and equipment may be seen as essential to replace obsolete items which are dragging the business down with too much downtime and maintenance expenses. Workable solutions can be achieved through our better interest rates
on asset acquisition finance:- Chattel Mortgage
, Leasing, CHP and Equipment Rental.
Finance is sourced and structured on an individual basis to best meet the objectives of our customers. The structure can be particularly important in working with cash flow, especially in quieter activity periods. Getting the preferred finance term, residual/balloon and loan amount approved by lenders through our negotiating skills can be a make or break service.
If current commercial loans are placing pressure on the business and inhibiting activities, speak with us about refinancing. While interest rates have been increasing, there may be pathways to a better loan through restructuring to achieve lower repayments to ease the pressure.
Where support of a more general nature is required, a Business Overdraft Facility
or a Secured or Unsecured Commercial Loan may be considered. These can be arranged as on ongoing support or over a shorter term to address immediate challenges.
The economic outlook may be somewhat uncertain but Business Finance can provide practical and positive solutions through cheap interest rate commercial loans to support all types of businesses.
Contact Business Finance on 1300 000 033 to discuss commercial loans and finance.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.