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, and that is even more true when the Government’s guidelines reinforce that.
However, even though we are socially distancing ourselves and staying home where possible, this doesn’t mean everything needs to stop. In fact, some business leaders are already planning to position their companies ahead of the competition when the shock dissipates.
Some business owners are exploring strategic upgrades to their equipment (new trucks, new cranes, etc.), and others are acquiring the latest cutting-edge technology (CNCs, robotics, etc.).
Below are a few reasons why businesses are planning to purchase equipment now:
The Australian dollar may strengthen
Many experts believe that the Australian dollar may strengthen over the coming months due to a Chinese economic recovery. 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 FY20s) – which will most likely be much better than trying to get approval off the back of FY21 results.
This improves your chance of gaining approval and secures better terms and conditions.
Automation & efficiency is key.
The equipment is technologically advanced in many cases, 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.
The automation edge or more efficient equipment will again provide a more significant competitive advantage.
Qualify for stimulus packages.
For eligible companies that qualify for the Government’s Economic Stimulus Package, for example, the 50% immediate tax deduction, it is important to plan acquisitions now rather than later.
The equipment must be manufactured, shipped, installed and “operationally ready” before 30/6/2021.
In many cases, equipment can take 7 -9 months from the date of placing the order through manufacturing to delivery.
Given the likely slowing of 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 incentive applies to new or used assets purchased before 30 June 2020. Get in touch to discuss your options.
Avoid “Hibernating”
At the end of the day, such decisions (where they make commercial sense) will allow certain businesses to be ‘market ready’ as soon as 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 preparing for the future.
If this article has sparked any questions or you want to discuss acquiring new equipment and preparing for the future, contact your Ledge Finance Executive or our offices here.
