First of all, asset finance is in regard to [mostly small] business owners looking to start out, expand or grow a business, using the purchase of assets [equipment, cars, office supplies etc]. Choosing the right type of finance to buy the assets your business requires, can mean the difference between thousands of dollars saved or spent. To help you choose the right option for you and your business, below are SOME of the options available:
Commercial Hire Purchase:
This type of finance lets you hire and use the asset until your last payment. On payment of the final instalment, the title of the asset transfers over to you. You can structure payments according to your own cash flow, and tailor payment options including loan period, deposit and a larger final balloon payment.
This is one of the more popular options. A Chattel Mortgage means you own the asset from the start, but your loan agreement is secured by the asset. Loan payments can still be tailored by choosing the term (usually 1-5 years) or structuring payments to free up cash flow during the year when you need it most.
With this type, the lender owns the asset, but you bear the risk of disposal of the asset at the end of the lease. This type of finance works best for businesses that need to have the latest equipment or vehicles without tying up large amounts of capital [cash]. You can choose to pay the lease in advance or arrears [terms between 1-5 years]. A residual value is required in line with the asset’s use and the ATO’s guidelines.
Suitable for borrowers who want to include the asset in a salary package – for example, a vehicle. A Novated Lease allows the borrower and their employer to sign an agreement to share the responsibilities of the loan. Loan terms are typically between 1-5 years, with monthly lease payments and the final residual payment based on your circumstances and guidelines set by the ATO.
Choosing the right finance:
Whether it’s a vehicle for personal or commercial use, machinery for production, or a shop fit-out requiring new equipment and furniture, when considering your asset finance options, think about the following:
1. How much capital do you need to grow your business?
2. When do you need to ‘smooth the bumps’ in your cash flow?
3. What are the tax outcomes of asset financing?
4. How long will you need the equipment?
5. Will you need to upgrade at any time?
6. How rapidly is technology changing in your industry?
7. Do you want to finance to own or finance to return your assets?
Each of the above asset finance options is suitable for commercial circumstances so it’s best to seek professional advice to ensure you get the right finance for your business needs.
Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.