This month we have been provided with some insights on inflation and tips on securing bank funding from Agribusiness Planning and Finance Consultant, Brett Fallon of Successiv. 

CPI and interest rate insights

Inflationary pressures have remained fairly consistent in the market. 

• The labour market is one of the most obvious inflationary pressures and continues to impact local businesses. It also impacts daily household lives, with strong inflation evident in household services costs.

• Fuel prices are another key inflationary pressure. Fuel prices have been recently under pressure and energy prices have a long range forecast of increasing, with the green electricity future clearly laid out ahead for Australians. 

These factors indicate a future with potential upward living cost pressures. 

What does this mean for business? It means that if rates don’t go up, it could be read in the tea leaves that they are certainly not coming down any time soon. Fixed rate quotes over the last couple of months have looked attractive relative to the potential uncertainty that the modern world poses.

The current RBA interest rate is 4.1% and is tipped by many economists to increase. It is easy to see why many are tipping this when rates are 5% or higher in other countries such as USA, NZ, UK and Canada.

Business Finance – making it easy

The best tip for securing bank funding is to undertake early planning for bank discussions.

• Get your end of year information to your accountant pronto as the most recent financial year statements are always preferred.
• Make sure that all ATO debt is cleared and that you meet your due dates. There are only a small number of financiers that will restructure ATO liabilities.
• Have profit versus tax planning discussions with your accountant. Keep in mind that profitable businesses can generally borrow more at lower rates.

All financiers have different risk appetites and policies. You don’t necessarily need to take the first no as the answer. Contact your advisor about your specific needs.

Personal Finance – gets tough

Home loans and personal loans are regulated lending and have less flexibility than what many business owners are used to with their business lending needs. Given the global economic shock post COVID, the current lending environment includes larger sensitisation on living expenses and interest rates.

Early planning is again the key. Live like you already have the new debt. Perhaps even put aside the expected repayment into savings in anticipation. That would then help you watch your personal spending and set you up for a smooth and easy loan application.

As a guide of the current market, most home loan rates are 5.7-5.9% and upwards based on individual risk assessments.