Window of Opportunity for Construction Industry

 In Daily Column, Inside AR Cash Flow

Fotolia_4219186_modAccording to SMH columnist, Clancy Yeates: ‘ Despite the improving economy, the Australian Banking Association chief executive Steven Munchenberg signalled the months ahead could prove challenging for borrowers in financial distress.’

Amazing! The man is a modern day Nostradamus.

”After nearly two years of difficulty there will be circumstances where the banks say ‘we are no longer able to support these businesses’. That’s what we would expect coming out of an economic slowdown.”

“The continuation of conservative bank lending policy…well, who would have believed that!”

These comments highlight the vulnerability of small businesses operating in weak spots of the economy, which face rising interest rates and a fragile household sector.

This news is particularly relevant and alarming to those companies operating in the construction sector. Winning strong contracts/tenders means little if you don’t have the cash reserves or assets to start jobs. Banks remain asset focused and debtor financiers are running a mile whenever they hear the word ‘construction.’ Not so in Europe and the US. Cash flow financing to the construction industry in the northern hemisphere is robust, but that’s not going to help a builder in Campbelltown or Camberwell.

Don’t down tools yet! Daniel Dunsford a civil engineer and part owner of debtor financier AR Cash Flow, reports funding to companies operating in the construction industry from his firm has risen 25% over the last two quarters.

‘Early last year we launched a suite of progress payment funding products tailored for this vertical (construction) and the uptake has been much stronger than we forecast,’ Dunsford said. ‘Accessing money tied up in invoices allows our clients to meet fixed and variable costs as well as capitalize new projects which engenders growth.’

Author: James Starr
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