NAB small business customers have been rushing to secure equipment finance loans as farmers around Australia have been stocking up on agricultural equipment, according to data.
Figures from National Australia Bank’s (NAB) agribusiness bank have revealed that equipment finance loans to small business customers have jumped by 341 per cent in total value over the past two years.
Equipment finance for agricultural businesses across enterprises of all sizes has increased by 33 per cent between 30 September 2019 and 30 September 2021.
Equipment finance lending for sheds increased by 80 per cent, while lending for grain silos jumped by 65 per cent over the last two years. Meanwhile, demand for finance for tractors was up 69 per cent, with NAB expecting these trends to continue as farmer confidence has remained high.
NAB executive regional and agribusiness, Julie Rynski said that these trends reflected strong seasonal conditions, which have created positive economic conditions across Australia, and the ongoing uptake of government incentives, including the instant asset write-off scheme.
She added that the generally positive outlook of the agricultural sector – which has been buoyed by strong commodity prices and the prospect of record crops – has also contributed to the rise in equipment finance lending.
“The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) is forecasting Australian winter crop production will reach a new national record of 58.4 million tonnes, even with flooding causing some losses and downgrades across several production regions,” Ms Rynski said.
“The area planted to summer crops in 2021–22 is forecast to increase by 36 per cent to reach 1.4 million hectares.
“Farmers are also being incentivised by the instant asset write-off scheme, which was expanded substantially in the 2020-2021 federal budget to $150,000, largely as a COVID-19 stimulus measure. In the 2021-2022 federal budget, the scheme was extended for one year to 30 June 2023, providing a longer window of opportunity for agribusinesses to make on-farm investments.”
Loans for equipment finance to regional businesses increased by 31 per cent over the last two years, while finance for cars and light commercial loans rose by 43 per cent, while finance for trucks and trailers surged by 40 per cent, and lending for construction equipment such as cranes and earth movers increased by 39 per cent.
Mr Rynski commented: “This is reflective of the ongoing migration of many capital city residents to regional Australia, which is great news for regional communities and their local economies.
“Overall regional net migration grew by a further 14 per cent over the quarter to September 2021, according to data released by the Regional Australia Institute.”
Riordan Grain Services, Victoria managing director Jim Riordan has seen an increase in investment across his supply chain as well as an increase in on-farm investment by grain growers, particularly in large silo and storage complexes.
“This year was our 25th year in operation and we loaded our 1 millionth tonne of export grain to bulk vessels,” he said.
“We have upgraded our transport fleet, prime movers, trailers and invested in our facilities to meet the demand.”
Accendo Financial co-founder, business coach, and educator Stuart Donaldson recently told The Adviser that mortgage brokers are willing to diversify into small-to-medium enterprise (SME) lending to capitalise on the demand for asset and equipment finance as around 20 to 30 per cent of their existing clients are business owners, but lack the time and confidence to do so.
He suggested that to build confidence brokers could align themselves with those who have the knowledge and experience to assist them with the transition.
“You really need to self-educate and gain an understanding of the things that you’ve got to be across when you’re dealing with those sorts of clients. That includes being able to look into a set of financial statements and identify the strengths and weaknesses of the business, and use that information to position yourself when you’re dealing with a client to ask the right questions.”
To hear more about diversifying into SME loan writing, make sure you attend the SME Broker Bootcamp in 2022. The free event has limited places, so secure a spot today by clicking here.
You can find out more about writing SME finance in the November edition of The Adviser magazine.