Equipment Finance options

Equipment Finance to help your growing business 

Youtube Equipment finance tips and guide

No matter whether you’re just starting out in self-employment, or you have an established business enjoying strong growth, chances are at some stage you’re going to need new equipment. 

!; Asset lease.

Types of Equipments 

IT equipment, Dential, office fitouts, or refurbishments, trade vehicles 

There will also be taxation advantages that differ depending on the type of financing you go with, but it’s always a good idea to speak with your accountant to learn about that in more detail!

1.   Asset lease

With an asset lease, the financier purchases the equipment but your business is able to use it in its operations while paying the financier a monthly repayment for the length of the lease term. Once this term ends 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.

Benefits to asset leasing, including:

• Fixed interest rates and monthly repayments which help with budgeting
• Flexible contract terms
• Possible tax deductions for the lease repayments (consult with your accountant to confirm)

2. Commercial chattel mortgage

 Unlike asset leasing, through chattel mortgages the customer takes ownership of the vehicle (chattel) at the time of purchasing (using funds that have been advanced by the financier). The financier then takes out a mortgage over the vehicle as loan security through registered interest via the Personal Properties Securities Register (PPSR). Once the loan has been paid in full and the contract is completed, the financier removes the interest which means the customer then has a clear title over the vehicle.

 The benefits of a commercial chattel mortgage are:

• Fixed interest and monthly repayments (beneficial for budgeting purposes)
• Flexible terms from 1 to up to 7 years
• You can add a residual value which lowers the monthly repayment amount
• As the vehicle is used for business purposes there are potential tax deductions available (check with your accountant about this and other possible claims)

3. Equipment rental

 Similar to asset leasing, in an equipment rental setting 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 from the financier at fair market value.

The benefits of going with equipment rental are:

• Fixed interest and monthly repayments (beneficial for budgeting purposes)
• All costs are known in advance
• It’s possible in some cases to add a residual value to lower your monthly rental amount
• Contract terms can be quite flexible
• The equipment isn’t seen as a business asset, nor is the debt seen as a liability
• Your rental payments may be tax deductible (speak with your accountant about this and other tax advantages of equipment rental)
• More cost-effective than paying upfront, especially with gear that has a short operational life

4. Cashflow funding

 Cashflow funding is where your future cashflow (i.e. invoices that are yet to be paid) can be used as security to borrow from financiers. Especially useful for businesses that have longer payment terms (3+ months), you’re able to use future revenue to help your business thrive right now.

There will also be taxation advantages that differ depending on the type of financing you go with, but it’s always a good idea to speak with your accountant to learn about that in more detail!

Example asset rates and cost.

Client bought a Grinder for $1.40M for their recycling business.

Couple sample options; These rates are based upon the 23 June 2024