With regional and agricultural businesses eager to invest in growth, NAB is supporting brokers with flexible, tailored and longer-term equipment finance solutions.
By: Chris Fileman, Head of Equipment Finance Sales, NAB
A combination of bumper harvests, favourable tax provisions and historically low interest rates have led to another strong year for equipment sales in the regional and agribusiness sectors, boosting demand for flexible, longer-term finance.
Demand has increased in each of the past three years for finance across sectors ranging from mining, earthmoving and construction equipment to heavy and light commercial vehicles, to agricultural equipment.
At NAB, we are lending 32 per cent more in the equipment finance category than before the pandemic as customers seek out tailored finance solutions that can meet their cashflow and business needs.
Drivers of demand
As the NAB Regional and Agribusiness Horizons report Land of Opportunity explains, strong demand for agricultural equipment has been driven by excellent harvests across almost all sectors. Tractor volumes are up 25 per cent on 2020, while harvester sales topped 1,000 – the highest figure since 2011.
But regional and agribusinesses are also investing in equipment now to take advantage of the Instant Asset Write-Off scheme, which allows buyers to claim full depreciation for the asset in the year of purchase.
The Instant Asset Write-Off provision will continue until the end of the 2022-23 financial year and is likely to fuel strong sales while it is available.
As Australia’s largest business lender, NAB has been experiencing record levels of demand for credit and surging growth in deposits. We are seeing both new and growing agribusinesses invest in land, equipment and stock. Our farming customers are optimistic about the future and our regional communities are poised for continued growth. With these businesses eager to invest in growth, brokers and equipment finance specialists have an opportunity to facilitate this expansion.
While demand for new machinery, vehicles and other business assets has been running hot, buyers have been facing supply chain issues and equipment shortages.
Global shortages of components such as microchips and batteries have caused significant delivery delays across all manufacturing sectors and import markets. The issues are particularly acute in vehicles, with delivery time for new cars, light vehicles, and agricultural equipment extending beyond 12 months in some cases.
These lengthy delays for new equipment purchases have boosted activity in second-hand equipment markets with buyers bidding up prices for used assets.
The importance of forward planning
Long waitlists have meant that customers need to be more strategic with their planning for major capital purchases – and this is another area in which customers are relying on their relationships with brokers more than ever.
For example, NAB customer BMC Partnership, a large contract cotton stripping, picking and transportation business based in Moree in northern NSW, had to place its order for three new cotton-picking machines 10 months before they were needed for the 2022 season.
To determine how many of the $1.4 million cotton pickers the business would need to add to its fleet, business owner Ross Munro had to make estimates almost a year in advance of the amount of cotton that growers were likely to plant and harvest.
BMC Partnerships – a customer of NAB for around 20 years – worked with equipment finance specialists and NAB bankers to structure a debt offer to suit the cotton pickers’ expected life span and, importantly, to ensure the debt suited the business cash flow.
For BMC, having a flexible solution that was timely and adaptable was a higher priority than NAB offering the lowest interest rate.
While interest rates are only one of the considerations in equipment finance, we are mindful that funding costs are beginning to rise, creating additional challenges for buyers.
NAB is taking steps to support brokers and protect customers, including offering the ability to lock in rates on equipment finance products where applicable. We are also supporting brokers with advice in areas such as foreign exchange and second-hand equipment policies.
In this dynamic and competitive environment, equipment finance specialists have a crucial role to play in helping regional and agribusinesses to navigate the impact of ongoing supply chain constraints and access funding solutions that can adapt to meet their requirements.
NAB is committed to supporting brokers to facilitate the growth of Australian businesses of all shapes and sizes.