Too often companies see finance as a way to fund individual equipment purchases or leases and enter into inflexible finance arrangements that do nothing to help the overall business. That's the view of Richard Bailey, Managing Director, Equipment Finance at GE Commercial Finance Australia and New Zealand.
"Construction contractors looking to expand their businesses should assess the value of their current equipment and leverage the equity in that to fund their businesses," said Bailey. "When reviewing funding options, they should consider how much equity they have in their existing equipment and how they might use this equity to finance growth or to provide additional cash resources to support the business."
"GE Commercial Finance is Australia’s largest non-bank lender and working with some of the world’s leading construction contractors we understand the business pressures they face," he added.
GE Commercial Finance focuses on understanding equipment values and structuring financing of ‘business events’ using equipment as collateral. Common business events include the acquisition of another business, succession issues requiring alterations to the security structure of the current loans to provide capital to pay out an existing shareholder, meeting external pressures such as a market downturn or margin pressure, and smoothing out cash flows.
"We can value equipment to provide the level of finance needed on the terms that give the business the space it needs to complete its restructuring. Leases should be structured to provide additional cash flow and/or to lessen the draw on existing cash flow."
Bailey said that a business could also refinance existing equipment leases when buying new equipment.
"One of our customers wanted to invest $1 million in new capital equipment but did not want to increase its existing monthly repayments. The business also needed to fund the ramp up period before that new equipment started showing some returns. By revaluing the existing equipment and extending the loan term we were able to maintain the current repayments and accommodate the additional advance to acquire the new equipment.
"Another client wanted to consolidate all its activities on to one site. We were able to restructure its loans to provide finance for working capital, equipment finance and the property – all based on the value of the equipment and property assets."
So when considering equipment finance don’t just think of it as a means to fund the acquisition of new equipment but rather as a way to fund the business secured by equipment collateral.
Authored by Richard Bailey,
Managing Director, Equipment Finance,
GE Commercial Finance,