The nation’s service station network is currently undergoing significant renewal.

Some of this renewal relates to the natural ageing of service station assets in the face of increasing regulations, particularly in the area of environmental management, where the increasingly high penalties arising from a prosecution for environmental contamination of soil and/or groundwater will generally result in the business being forced to close.

But the current renewal activity is being heightened by the convenience revolution – where service station sites are being revamped to capitalise on the opportunity to capture an increase share of the convenience market.

“The convenience revolution is generating a need for service station businesses to spend money on expanding the footprint of their shop – as opposed to the fuel forecourt – as they seek to increase their convenience product range and/or install café style facilities in order to serve prepared food to their customers”, said ACAPMA CEO Mark McKenzie.

While the need to adapt traditional service station assets to cater for fuel and convenience and convenience only customers is now well recognised, one of the barriers to this change is the ability to secure affordable finance.

“A common complaint I hear is that many dealers and independent businesses are finding it increasingly difficult to secure good asset financing solutions – and this difficulty is increasing as the Banking Industry starts to respond to revelations of the current Banking Royal Commission”, said Mark

ACAPMA’s analysis of the current issue suggests that the difficulty encountered by business owners in securing finance can be attributed to two factors.

First, the Banking and Finance industry has a poor understanding of the fuel retail industry. While recognising that the industry is asset rich, there is general scepticism amongst financiers about the long term financial sustainability of fuel retail businesses which are typically operating with low margins in a highly-competitive markets.

As a result, the initial reaction of the finance industry is to place little value on the assets of the fuel retail business itself, instead requiring business owners to put up personal assets to secure new loans for asset improvements – or alternatively, apply the loan rates that are well above what might otherwise be considered reasonable.

But the second aspect of the current challenge is that the owners of fuel retail businesses are time poor and generally do not have the time or expertise to be able to provide prospective financiers with all of the detailed and strategic information needed to overcome the Banking Industry’s lack of appreciation of how the fuel retail industry operates.

The result is that fuel retailers are forced to choose between (a) tying up their own personal assets, (b) borrowing money at unattractive rates, or (c) simply deferring investment indefinitely – with consequent operational and business risks.

ACAPMA is currently working with another industry body – the Commercial Asset and Finance Brokers Association (CAFBA) – to advance a solution to the current financing impasse.

“The Australian Asset Market has, at any one time, about $100B in receivables in the form of loans that are on the books of banks and finance companies”, said CAFBA President David Gandolfo

“New business typically accounts for about $40B of this total and more than two-thirds of this new business is secured via brokers and intermediaries”, David added.

The benefit of working with a broker is that their job is to take the time to understand the nature of the business (and its financing need) and then translate this into a language that can be readily understood by the banks.

“Finance brokers work with their customer businesses (more than 90% of which are micro and small businesses) – to secure a financing solution that works for the business and the bank – not just the bank”, said David

David Gandolfo will be providing an overview of asset financing solutions at the 2018 Asia Pacific Fuel Industry Forum, which is being held in Auckland between 4 and 6 September 2018.

During his Keynote address, David will also introduce the work that is currently underway between his organisation and ACAPMA, as both organisations seek to secure an asset financing solution that better meets the needs of dealers and independent fuel retail businesses in Australia.

“Ultimately, financing decisions are a matter for the business owners themselves – not ACAPMA – but our intent is to work with CAFBA to improve the quality of asset financing options that are available to fuel retail businesses in Australia”, said Mark

Details on how to register to attend the 2018 Asia Pacific Fuel Industry Forum, together with details about the broader forum agenda and other speakers, can be found at the event website