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Every business must have the right equipment at the right time to operate effectively.
In agricultural businesses, the right equipment is often expensive and long-lasting.
Financing the purchase of such assets can also be complicated.
NAB Equipment Finance Specialist Charlie Coote says food companies today face two major challenges in financing equipment purchases:
- the rising cost of new technologies;
- supply constraints, which means that equipment must be ordered much further in advance.
“Our clients need to be better prepared and strategic in planning major capital purchases,” Charlie said.
Field experience when you need it
The need for long-term planning is something Ross Munro of BMC Partnership knows well.
BMC Partnership is a large cotton contract stripping, picking, manufacturing and transport company based in Moree, Northern New South Wales.
Ross runs the business with his son Scott managing day-to-day operations.
As part of its normal business, the company purchased three new cotton picking machines for its fleet for the 2022 season, priced at $1.4 million each.
Ross must have placed his order about ten months before he needed the pickers.
“You have to say, ‘Who is going to plant cotton? How much cotton is going to be planted?’ to make the numbers work. That’s a big call this far,” Ross said.
The stakes are high. Some contractors who ordered late are still waiting for equipment to arrive. They risk missing the picking season.
This means that when the equipment arrives, they will have to pay for it without being able to use it to generate income.
Fast, flexible and punctual financing
For Ross, access to flexible financing was key to the success of his purchase.
BMC Partnerships has been a client of NAB for about 20 years and Ross worked with Charlie and banker Liberty Walker to finance the purchase of the three cotton pickers.
Charlie and Liberty structured the debt offering based on the asset and its expected life and, most importantly, to ensure that the debt matched the cash flow of the business.
Ross wanted to compare NAB’s offer to commercial financing from the equipment supplier, but with the machine ordered and on the way, he was still waiting for a response.
“There was a high demand for these machines and I knew if I failed there would be 30 customers taking this machine away from me,” Ross says.
“I was looking at the ship on the tracker. I could see it going through the Suez Canal. It was going past Perth, past Fremantle. I could see the deadline getting closer… The next second it’s going to be here.”
As the machines approached the port, the supplier’s financing offer finally arrived, allowing Ross to make the comparison.
The interest rate offered by the supplier was lower than the rate offered by NAB, but the terms were less flexible.
NAB was able to provide a solution that was quick, flexible, and responsive to cash flow and business needs.
Ross accepted NAB’s offer based on more flexibility.
“NAB was much more negotiable with planning,” he said.
“I don’t mind paying more interest.
“I’m looking for a bank that can move when things change and change when things change.”
Assistance when needed
This year, Ross is happy to have opted for flexibility – widespread flooding in the Moree area halted operations midway through the picking season.
“I have machines stuck in flood waters.
“Nothing is picking cotton today. In my budget, I guess I’m picking but it’s not.
“I have seven machines that do nothing, but I already thought it might happen, so I moved my repayment schedule into a format that will meet that need,” he said.
NAB Banker Liberty Walker says the essence of the deal was to be able to offer a bespoke solution to the client.
“We were able to do it for Ross with these three machines, do it fast and do it right the first time,” Liberty said.
“It’s about being quick to market and then leveraging that deep relationship with Ross over the past 20+ years, while meeting his requirements and adapting it to his business and his flow. cash.”
It’s all part of maintaining customer relationships.
NAB had worked with Ross’s business on complex transactions in the past and assisted him with business succession planning.
NAB has a long tradition of supporting its customers through good times and bad.
During past droughts and floods, NAB bankers have been on the ground, talking to customers, restructuring debt and delaying equipment financing repayments when needed – helping agribusinesses keep going with one thing less to worry about, as Charlie says.
Aside from this year’s rain and some common starting problems, Ross is happy with his cotton pickers.
“There was a lot of work we had to do with them to get them up to full steam, but they’re purring now,” he said.
To find out more about NAB Equipment Finance, go to – Commercial Car, Vehicle & Equipment Finance – NAB Or call Chris Fileman, National Equipment Finance Manager on 0404 883 459.