Lifting financing standards Heavy Equipment Financing Australia provides advice for businessses in the construction boom

LIFTING FINANCING STANDARDS

Despite the construction sector’s ‘mega boom cycle’, financial institutions are showing a reluctance to lend money in the face of the Royal Commission into the Banking sector. According to Mark Whitla, that’s the type of environment Heavy Equipment Financing Australia thrives on.

WORKING AS A CREDIT analyst with BankWest & Westpac in the late 1990s, specifically lending to businesses in heavy industry, encouraged Mark Whitla to make a positive difference to each customer.

“I’ve always been passionate about what I do and I like construction people. They are mostly honest, hard working and straight shooters looking for a company to manage the financing process,” he said.

Whitla saw an opportunity to provide a service that benefited customers rather than the bank and in June 2000 started in the broking industry. He could see a gap in the market by providing excellent customer service and results, by tailoring financial packages to suit individual businesses, which he does so through his business Heavy Equipment Financing Australia (HEFA).

“We’re relational rather than transactional. Everyone’s risk profile, business appetite and age are unique. We have an old fashioned approach to customer service and look to develop a transparent working relationship, get to know the customer’s business and the relationship strengthens over time. This allows us the ability to choose each financier for each specific financial requirement more accurately, delivering the best result for the customer.

“We started HEFA with that mantra and to specifically target small to medium businesses in the construction and earthmoving equipment sectors. More recently, crane finance has become our strongest focus in terms of activity and secured business. Many companies deserve better finance solutions than those delivered by their current providers,” he said.

Mark Whitla from Heavy Equipment Financing Australia.

One company that HEFA has been helping recently is Cosmo Cranes. Celebrating their 15th year, the Sydney based business is owned and managed by the Handley brothers, John and Josh. According to John Handley, the current construction boom is keeping the business busy and HEFA is helping to grow the fleet.

“We operate a couple of businesses within the Cosmo Group, Cosmo Cranes with our tower crane and mobile cranes fleets, and Crane Decks Australia – our loading platform business,” Handley said.

“Cosmo Cranes operates around 42 tower cranes which include Terex with some XCMGs and the new RECOM range, which we’re excited about. The mobile fleet includes Demag, Grove and franna cranes. Crane Decks Australia manages approximately 220 crane decks, and we’ve got a crew of about 90 guys. So, we’re an all round materials handling company.”

According to Handley, the business predominantly focuses on the east coast where all of their customers are enjoying continued growth. The tower crane fleet has been busy with the residential high-rise sector and is now busy with refurbishing hotels as well. The infrastructure sector is an area that Cosmo Cranes is focusing on with its mobile fleet. The company’s facilities are in Western Sydney where there’s a lot of infrastructure work planned, with the new airport coming on line at Badgerys Creek.

“We’ve been working with HEFA for a while, they’ve financed a lot of our decks. We are also welcoming the arrival of our new Demag 300t crane in January, which is the first in the country” he said.

“We have a good relationship with the team at Terex Cranes, and collectively with HEFA and BOQ Equipment Finance have secured a competitive and satisfactory result.”

HEFA likes to support the use of smaller financiers like BOQ as an industry partner (where appropriate), rather than one of the “Big Four” ensures

“In general terms, if you’ve got a customer that is buying a large crane, and you are creating a new market for that crane, you want to ensure the payment terms and ability for debt repayment are at a sustainable level.”

diversity in the banking sector.

“Mark gets to know your business very well. He asks the questions that other people don’t ask, and therefore understands how the business runs. He can then paint a detailed picture for the finance companies, so he’s really good in that sense. He’s very reactive too – if there’s something that needs to happen he gets onto it straight away. He started on the crane decks and got to understand that business and now it’s fairly easy to get finance.”

According to Handley, the 300t will be very busy once it arrives in the New Year. Cosmo cranes has a number of projects coming to an end with the tower cranes so primarily it has been bought to pull these down and it’s going to be busy doing so.

Whitla comments on the importance of customer service.

“Obviously, there are a number of large competitors out there including the banks who can deal on a direct basis. But we don’t think they service customers like we do. We take the time to listen to the client, visiting them on site or their premises (wherever that might be) and make things happen from there.

“There’s definitely a spot in the market for HEFA, to provide quality service on an ongoing basis. Generally speaking, we think good quality service is going out of fashion, so that’s what we focus on and pitch to our customers,” he said.

Cash flow or business liquidity varies from one customer to the next so structuring the finance and aligning the financial package to specific requirements is important.

“In general terms, if you’ve got a customer that is buying a large crane, and you are creating a new market for that

crane, you want to ensure the payment terms and ability for debt repayment are at a sustainable level,” Whitla said.

Crane hirers all vary and have a different liquidity and business profile. For a business with a small crane fleet it is paramount to ensure the finance structure and approval conditions suit the client’s cash flow requirements. It’s essential to understand each business and find out where the customer base is and examine industry trends. If there is strong cash flow now but they expect the conditions to slow in the future, a business should be factoring the debt amortisation accordingly.

As a result of the Royal Commission in to the banking sector, finance is not easy to obtain. Lenders are being cautious, especially with large value single assets, so the I’s have to be dotted and T’s crossed with credit paperwork. Some financiers are also using the current environment as an excuse to coerce businesses to provide extra security and approval conditions. These can include hefty cash deposits, shorter finance structures, General Security Agreements and Loan Subordination Agreements. Customers should challenge and question these proposals wherever possible.

Some transactions can be weeks in the preparation, requiring the most up to date financial information including asset value retention and the secondary market. HEFA works closely with accountants to get cash flow projections for the business, industry data regarding the value retention and the resale value of the crane.

“We’re driven by customer satisfaction, and achieving the desired result with every transaction. Sometimes, new customers come to us after they’ve gone to their bank or another broker and the application has been declined or there’s been an unsatisfactory approval. So we can find ourselves literally behind the eight ball,” Whitla explains.

“But, in most cases we can overcome historical knockbacks and get the deal done and when that is the case, we have a happy customer and another success story.”