Businesses finding the fuel relief measures currently available are not supporting their operation may seek cash flow support through business finance brokers. The fuel crisis caused by the conflict in the Middle East has resulted in supply issues, especially of diesel, and high prices on all types of fuel. A scenario which is hitting businesses that operate heavy vehicles and rely on fuel particularly hard, especially in the transport sector.
The situation in the Middle East is evolving seemingly by the hour. But even if the proposed ceasefire is implemented by all parties, and the shipping lanes for tankers remain open, it has been stated publicly that it will take weeks to see relief in the form of normalised prices at the bowser.
The Prime Minister, Anthony Albanese, has said that tankers are on the way to Australia and the Government is continuing to work on sourcing supply and has implemented fuel relief measures. Measures which include a reduction in the fuel excise levy and road user charge for 3 months. These will be appreciated by truck owners but may not be enough to sustain profitable operations for many businesses.
As a growing company ourselves that has been assisting businesses with their finance requirements for over 25 years, we know the reality of these types of situations. High fuel prices will have played what can only be described as havoc with many business cash flow situations. Not all operations will be able to pass their increased costs onto their customers. Many having to absorb the cost themselves. Being unable to source fuel may have left many operators unable to work and without income.
A sudden and unexpected increase in costs can leave a business short of funds to meet their regular expenses and commitments. Bills pile up and need to be prioritised for payment. Time is used up in dealing with the accounts and in discussions with suppliers to potentially defer payment. On the other side of the balance sheet, your customers may be facing similar situation and having trouble paying your invoice, thus causing income issues.
These situations can escalate and present very serious consequences. Default on vehicle loans and the risk is having the truck repossessed and/or a credit rating downgrade. Default on paying supplier invoices and risk being unable to source necessary materials. Being unable to make the wages and other essentials payments and the situation can be dire.
Yes, we do understand business operations and the pressures facing owners. Trying to stay across the bills and then catch-up and get the bank balance back on track, even after the fuel situation normalises, can be a very challenging process. Seeking support through short-term finance before the worst-case scenario develops may be an astute move.
What is cash flow support?
Cash flow support is financing designed and structured to provide a business with funds as required to meet their ongoing expenses. This type of financing is differentiated from financing of specific goods such as heavy vehicles as the purpose is more general. The financing typically covers a range of expenses and payments that a business needs to meet.
This type of financing can be set-up to deal with short-term shortfalls in income compared with outgoings or as a longer-term credit facility. The specific type of loan can depend on the individual requirements of the business operation.
Loans to Support Fuel Relief Measures
Loans to support businesses with a shortfall in their cash flow include Overdrafts, Lines of Credit and Business Loans. Business Loans may be Unsecured or Secured. Interest rates on unsecured credit facilities will have a variable interest rate. The rate is subject to change, generally when the Reserve Bank announces changes to the cash rate.
Where a business can provide assets as collateral for a Secured Business Loan, they may enjoy a lower, fixed rate compared with the variable rate on unsecured loans.
Overdrafts and Lines of Credit are extremely popular and useful finance tools for businesses. They may be set up for a short term or as ongoing credit facilities. While the rate is higher than secured loans, the interest is only charged on the amount of credit used. Interest applies on a monthly basis. There are no fixed repayments. Businesses pay down the loan as their cash flow permits.
These forms of credit can provide many businesses with the flexibility they require in the current economic environment. Providing stability and the assurance that they can meet their expenses and finance commitments and keep their operation on track.
If the current fuel relief measures are not providing the much-needed support for your business, reach out to one of our brokers to discuss potential loan solutions.
If fuel relief measures are insufficient for your business, connect with Jade Truck Loans on 1300 000 003 to discuss cash flow support solutions.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.
