For now four months consecutively, the construction activity report as indicated contraction in two sectors of the market – housing and apartments. One of the key reasons is seen as the RBA rate rises and with further increases expected and the lag between rate rises and effect in building being realised, operators may be feeling concerned. Cheaper business and equipment finance through Jade Finance may present a solution for operators facing challenges with construction activity contractions.
In addition to the contraction being recorded in the residential building and construction sector, uncertainty is also present over the economy in general. The RBA Governor Philip Lowe included reference to uncertainty around the global economy in several monetary policy statements this year. Treasurer Jim Chalmers has also made a number of comments around the probability of a global recession and Australia may not necessarily be spared.
The overall scenario, especially after the optimism surrounding Australia’s impressive recovery from the pandemic crisis, may be quite confronting for business owners to process. Individual operators may see the situation as sign to be proactive in addressing potential risks. Others may already be facing issues.
Where a business is facing cash flow issues, support with a Business Overdraft may be a workable way round. For those that still need to buy new machinery and can’t put off those decisions, sourcing the cheapest equipment finance will no doubt be a priority.
The September Performance of Construction report may provide insights for operators and our overview of finance options may provide assurances that support is available.
Construction Performance Report
The Ai Group and the HIA (Housing Industry Association) issued the PCI which reports the activity in key sectors of building and construction. The September report reveals that both the house and the apartment sectors are in ‘deep contraction’ and the decline rate has lifted in comparison with the August data.
The commercial construction sector posted an improvement and the engineering sector remained stable. New orders in commercial are given as the reason for the strong performance.
Economic uncertainty and rate rises are placing pressure on demand. Enquiries for new orders have declined for home and apartment builders. Supply-wise, the ongoing issues with supply chains are continuing to affect growth. However, the report sees some early signs of this situation easing. Improvements are also recorded in employment.
According to Peter Burn, Chief Policy Advisor, the residential sectors were clearly being negatively impacted by higher interest rates. He said that in coming months, the lag effect could be felt as the impact of the recent RBA rises is realised. On a positive note, Mr Burn said builders in this residential sector could feel some level of comfort as the RBA slows down the rate of its increases.
The HIA’s Nicholas Ward noted that in the COVID-19 pandemic period, many builders had accumulated a good pipeline of work. He said that it would be a lengthy time before the weaker demand was realised in less activity on the ground.
With now four months of building activity contraction after the sector was significantly busy in the pandemic, the big change-up and prospects may leave some with reason for concern. Possibly bot immediately but in forward planning. Concern may be alleviated by addressing the cost-side of the business with a review of finance and business loans. This is an area where we where can offer positive support and assistance.
Workable Finance at Cheaper Rates
We provide finance to all types of business operators in the construction and building sector. These facilities include general commercial loans and equipment finance. With the price tag on many pieces of construction equipment, the loan can be critical to a business being in a position to proceed with acquisition.
While many banks have strict guidelines around approving commercial loans and finance, our non-bank lenders that specialise in this sector, can show greater flexibility. This may relate to being more negotiable on the finance rates and/or with the loan amounts they will approve and to the structure of the finance.
How the equipment finance is structured plays an important role in achieving a solution that will work with cash flow and deliver positively for the operator. Elements of the loan such as the loan term and the amount of any residual or balloon are covered in detail by our consultants who work to negotiate with lenders for the best outcome.
Reviewing the rates we are achieving across our portfolio illustrates how ability to deliver on cheaper rates. The finance calculator provides operators with the essential tool to plan major equipment acquisitions and can assist in making decisions around other business finance as support measures.
Contact Jade Finance 1300 000 008 to discuss general commercial loans and asset acquisition finance for construction equipment.
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