In these uncertain times, there is one certainty – that the initial economic shock of COVID-19 will eventually pass.
The immediate natural human response to any threat is to retreat and bunker down, but even more so when the Government’s guidelines are reinforcing that. However, even though we are social distancing and staying home where possible, it doesn’t mean everything needs to come to halt. In fact, there are business leaders out there who are already planning to position their company ahead of the competition for when the shock begins to dissipate.
Some business owners are exploring strategic upgrades to their equipment (new trucks, new cranes etc.) and others, acquiring the latest cutting-edge technology (CNC’s, robotics etc.).
Below are a few reasons why businesses are planning to purchase equipment now:
Australian dollar may strengthen
- Many experts believe that the Australian dollar may strengthen over the coming months off the back of an economic recovery in China. So, why is this important? Generally, most equipment is manufactured and purchased from overseas suppliers, meaning a stronger Australian dollar will make these international purchases more appealing.
Higher “rating” when applying for finance
- Seeking finance now or in the next few months is much more desirable than waiting a year. This is because the finance assessment (and client “rating”) can be based on FY19 results (or even FY20’s) – which will most likely be much better than trying to get approval off the back of FY21’s results. This not only improves your chance of gaining approval, but also in securing better terms and conditions.
Automation & efficiency is key
- In many cases, the equipment is technologically advanced, saving time, labour and costs due to higher accuracy. One thing that will have changed once we get through COVID-19, is that many companies will be leaner and meaner. Having the automation edge or more efficient equipment will again provide an even greater competitive advantage.
Qualify for stimulus packages
- For eligible companies who qualify for the Government’s Economic Stimulus Package, for example, the 50% immediate tax deduction, planning acquisitions now rather than later is important. This is because the equipment must be manufactured, shipped, installed and “operational ready” before the 30/6/2021. In many cases, equipment can take 7 -9 months from date of placing order, through manufacturing to delivery. Given the likely slowing in overseas manufacturing and shipping, decisions like these are time critical and may well exceed the normal 7-9 month period.
- The need to be time critical also applies to the instant asset write-off incentive which has been increased to $150k. This applies for new or used assets purchased before 30 June 2020. Get in touch to discuss your options.
- At the end of the day, such decision (where they make commercial sense), will allow certain businesses to be ‘market ready’ as soon as the economic conditions turn. Planning to purchase equipment now can create a competitive advantage over those businesses that “hibernate” during these critical months – instead of actively planning for the future.
If this article has sparked any questions or you would like to discuss acquiring new equipment and preparing for the future, contact your Ledge Finance Executive directly, or contact our offices here.