The number of new and used import commercial vehicles being registered is showing heartening signs of being on the increase – 23,924 new vehicles registered in the 12 months to end December 2012 versus 20,621 for the year before – and 3516 used imports in 2012 versus 3176 in 2011.
Changes of ownership also increased in that period – 114,125 for the 2012 year versus 111,740 in 2011.
It would seem that at last the momentum is gathering with regard to the Christchurch re-build – and this is having an impact, combined with the generally positive economic outlook (albeit cautious) that New Zealand is enjoying.
This makes it timely to consider why financing heavy vehicle and equipment purchases might be more prudent than using capital, and why doing so through the non-bank sector may be worth considering.
Clearly there are significant advantages in not having all your capital tied up in depreciating assets. The flexibility to be able to invest in other areas such as employing good people to operate the machinery makes sense when the business opportunities are currently available.
Diversification is often quoted as one of the key strategies to manage risk when investing. When borrowing to invest, the same is also often true.
Asset financing through a specialist financier, as opposed to having all your eggs in the one basket with your banking provider, is worth seriously considering for the following reasons:
* Many New Zealand businesses are family-owned small to medium enterprises. Many of them are funded via their bank using the family home as security. Splitting property and equipment assets is an attractive option to spread the risk.
* Banks often have tighter lending criteria than specialist financiers. At a time when the business is looking to expand, a highly conservative approach is not always what is required. Being able to talk to someone who understands the risks and is prepared to back you is a valuable endorsement of your business strategy.
* Non-bank financiers, particularly in the commercial vehicle space, employ specialist professionals who only operate in the sector in which they are lending. As a result they have an excellent working knowledge of the industry and its challenges. Apart from being able to provide advice as to the appropriateness of the proposed transaction, they are able to give valuable insight into what’s happening in the industry, where possible opportunities might lie and have a view on how the industry is likely to perform in the future. Customers certainly value this insight and expertise.
* Because of their specialist capability, non-bank financiers provide a broader range of product which can provide further flexibility to business. Their lenders are able to sit down with businesses to determine whether, for example, leasing equipment through them might be a better option than borrowing to purchase outright.
* Again as a result of the specialist areas in which they operate, some financiers provide forums for industry participants to come together to talk about the industry and to share knowledge with each other.
*It is wise when considering purchase of commercial vehicles and equipment – investment in which is often substantial – to consider all the available options.
* It’s also wise to remember that price alone should not be the only consideration when entering into transactions like these.
* There may well sometimes be a premium paid to borrow through specialist credit providers, but the benefits as shown above outweigh the disadvantages and the value these organisations can provide to your business makes that premium, if any, worthwhile.
