Why use equipment finance in your business?
Many businesses simply do not have enough cash saved to purchase income generating equipment outright. Buying equipment with financing allows it to be paid for over a number of years, rather than in one payment, which makes it much more affordable.
Equipment financing is also a popular alternative to a standard business loan. That’s because the financing may often be arranged with the new equipment as collateral, reducing your overall financial risk. It also allows you to preserve your savings for use in other areas of your business, should the need arise.
Typically, equipment financing allows you to finance 80 to 100 percent of the cost of the equipment you need, so it can potentially help you on a deposit. Many lenders also offer flexible payment terms to help you maximise your cash flow. There may also be substantial tax benefits so check with your accountant to see how they may apply to you.
What kind of equipment financing options are available?
The type of business you have and the purpose of the equipment you need will often determine what kind of equipment finance is right for you. However, generally speaking, we could assist with these different types of equipment financing options:
This is a straightforward loan where you own the equipment. The equipment itself is used as the security for the loan. Once the mortgage is paid out or the loan is paid off, the mortgage is removed and the vehicle or equipment is officially yours. Most commercial asset finance is done as a Chattel Mortgage.
An asset lease is an option that leaves the lender to retain actual ownership of the equipment. You pay a fixed monthly lease rental for the term of the lease, then you have the option of paying the residual and taking ownership of the equipment, selling the equipment to pay out the residual, or refinancing the residual to continue the lease.
Commercial Hire Purchase
With this option, the lender purchases the equipment and hires it back to you for a set period of time. At the end of the contract term and when it has been completely paid out in full, you take ownership of the equipment.
Every business is different, and it is important to consider each of these financing options carefully before choosing the one that will best suit your particular business and your objectives. We recommend that you talk about your financing options and their tax implications with your accountant before you come to see us to discuss your needs. Please let us know if you need a referral to a reliable accountant.
What kind of equipment can you buy?
Almost any kind of equipment can be purchased using one of these asset financing options, provided it is being used for legitimate business purposes. Some types of equipment commonly purchased with asset financing are:
If the equipment you need is not on this list, that doesn’t mean we can’t arrange financing for it! Tell us about your requirements and we’ll help you find the right deal for your particular circumstances and financial situation. As with mortgages, we can source financing from a wide variety of lenders which helps to ensure that you get the right deal for your purposes at a great rate.
Remember, tax time is a great time to make the most of EOFY sales and tax deductions for your business. If you’re in the market for some new business equipment then it pays to talk to us beforehand. With your financing pre-approved, you’ll have better bargaining power with your suppliers. To find out more about our asset financing services, please feel free to call us any time!