Which Asset Finance is right for your business?

When it comes to financing equipment for your business, there are four main options available. I've put together the following article which should help you better understand each option and its potential benefits.

I know I may be a little biased, but it's best to seek an experienced broker to help navigate your selection. A good adviser will help you make the right decision:

1. Do you need additional or replacement equipment?
2. What brand or model do you need and why?
3. Is the equipment new or used?
4. Is the equipment used every day or seasonally?

Your accountant will explain the tax advantages depending on the type of financing you go with. Let's go through the four main types of equipment finance together:

?

1. Asset lease

The financier purchases the equipment, but your business uses it while paying the financier a monthly repayment for the length of the lease term. At the end of the term, you have the option to either pay a residual amount which gives you total ownership of the equipment, refinance the residual to continue the lease, or sell the equipment and start a new lease with new equipment (most common).

?

There are several benefits to asset leasing, including:

• Fixed interest rates and monthly repayments which help with cash flow.
• Flexible contract terms so you can suit your cash flow.
• Tax deductions for the lease repayments.

?

2. Commercial chattel mortgage

The customer takes ownership of the vehicle (chattel) at the time of purchasing. The financier holds a mortgage over the vehicle as security through the PPSR or Personal Properties Securities Register. After the loan is repaid, and the contract is completed, the financier removes their interest on the PPSR, which means the customer then has a clear title over the vehicle.

?

There are many benefits of a chattel mortgage:

• Fixed interest and monthly repayments to help with cash flow.
• Up to 7 years loan terms to help with budgeting.
• You can add a balloon repayment to lower the monthly repayments.
• There are potential tax deductions available as it's used for business.

?

3. Equipment rental

?The financier purchases the equipment and you’re able to rent it from them by paying fixed monthly repayments over a fixed term. Once the contract has been completed, you can then choose to either give the equipment back, continue renting, or buy it outright at fair market value.

?

The benefits of equipment rental are:

• Fixed interest and monthly repayments to help with cash flows.
• The costs are known in advance.
• Add a balloon to lower monthly rental amounts.
• Flexible contract terms.
• The debt isn't seen as a liability.
• Your rental payments may be may be tax deductible.
• More cost-effective than paying upfront, especially if you'll be changing it every few years.

4. Cashflow funding

?Your future invoices that are yet to be paid, can be used as security to borrow funds. This is used by businesses that have long credit agreements with their suppliers and customers etc. This is one of the better cash flow solutions.

?

• Quick approval turnaround - 24 to 48 hours.
• Flexible terms
• Improved cashflow, which gives you the ability to grow without cash restraints.

?

Do you have an asset finance or cash flow problem, which needs a solution?

?Speak to Loan Market - South West Commercial, and ask for Matthew Stack - 0423 237 242. We'll learn your needs and find you a solution with over 60 lenders on our panel. We can work quickly and to your requirements.

So give me a call today on 0423 237 242 to have a chat about your needs, or alternatively send us a linkedin enquiry and we’ll be in touch shortly with a response.

Matthew Stack

Loan Market - South West Commercial

0423 237 242

#assetfinance #equipmentfinance #truckfinance #cashflowfinance #prospa #liberty