Chattel Mortgage, Hire, Lease or Rent Your Equipment

Chattel Mortgage, Hire, Lease or Rent

There are different ways to finance the equipment you are after. You can purchase the equipment using either a Chattel Mortgage, Hire Purchase, Lease or Rent finance product. Equipment is most often purchased with a Chattel Mortgage (95%). But that is not always the best option. Your accountant is who will best advise you as to which method best suits your business and circumstances.

We can assist with all these options:

It depends on your business which accounting method and product is best. Speak with your accountant to confirm.

Different Approval Options

There are also different ways of getting finance approval for your equipment purchase. Working together with our experienced finance brokers, we can decide which is the best option for you and your business.

The options include:

  • Low Doc
  • Medium Doc
  • Full Doc
  • Balloon Refinance
  • Replacement Finance

Go to our Approval Process Page to find out more.

Equipment Finance Options

Chattel Mortgage – Specific Security Agreement

A Specific Security Agreement (formerly Chattel Mortgage) facility can benefit those small to medium sized businesses that account for their business using the Cash Method.

Like the other financing products, you have full use of the equipment during the term. You have the security of a predictable monthly payment, which can be lowered by including either a deposit or an end of term “balloon / Residual”. Unlike other products, however, you have ownership of the equipment from the beginning. It is simply a loan secured by a mortgage over the equipment.

A balloon is the amount that will need to be paid at the end of the term (much like a residual on a lease). Having a balloon put into your agreement lowers the payments which might better suit your cash flow and whether you have a balloon or not is entirely up to you. However, you may choose to pay the loan down to zero which means once the final payment is made there is nothing else to pay.

Features:

  • Subject to credit approval, finance 100% of the purchase price
  • The equipment being finance is all the security required in most cases
  • Standard Terms range from 3 year to 5 years but can be varied to up to 8 yrs
  • The interest rate is fixed for the term
  • Claim the GST component of the purchase price in your next BAS period
  • You can use the GST refund to contribute towards paying off the loan, thereby reducing the amount financed and the interest paid over the term of the loan
  • Option to have a balloon payment at the end of the term which will reduce the payments during the term
  • Repayment can be structured to by Quarterly, Bi-Annually or Yearly
  • No GST is charged on the payment

Benefits:

  • Interest and depreciation is tax deductible if the asset is used for business
  • Customers can claim the GST in their next BAS period
  • The repayments are fixed over the term
  • You can choose terms from 1 to 8 years
  • You gain equity in the equipment over the term
  • A balloon payment will lower your regular monthly payments.

Hire- Commercial Hire Purchase

A Commercial Hire Purchase (CHP) is a facility under which you obtain goods by hiring them over the term, with title transferring to you after the last payment.

It will suit your company if you use the ‘accrual’ (turnover >$1m p.a.) method of accounting for GST. It may also be suitable if you use a car for business related purposes. Under the ‘accruals’ method, the GST component of the purchase price can be claimed back on your next Business Activity Statement, rather than claiming the GST over the term of the finance contract.

Features:

  • You do not become owner of the equipment until all payments are made under a CHP arrangement.
  • Either finance the total purchase price or use a deposit or trade-in to reduce the loan repayments
  • Option to use the GST refund to contribute towards paying off the loan, thereby reducing the amount financed and the interest paid over the term of the loan
  • You can choose to have a balloon payment at the end of the term which will reduce the payments during the term

Benefits:

  • Claim a tax deduction for the depreciation as well as the interest paid each financial year. GST is not payable on the repayments as they are calculated using the GST inclusive price.
  • Subject to credit approval, finance 100% of the purchase price
  • The repayments are fixed over the term
  • You can choose terms from 1 to 5 years
  • You gain equity in the equipment over the term
  • No GST is charged on the payment

 

Lease – Finance, Novated or Operating

Finance Lease can be a cost effective way for a company to acquire assets. Financing costs are calculated on the price of the equipment for an agreed time frame in return for a series of payments. Most contracts are very flexible and will allow you to choose either to pay monthly, quarterly, semi-annually or annually.  If you a have a business that experiences seasonal income, you can choose to make your repayments on a seasonal or irregular basis.

Novated Lease is a way in which you can obtain a vehicle plus all its running costs like fuel, insurance,
registration and maintenance but packaged through your employer as a ‘salary sacrifice’. A portion is paid from your pre-tax salary. Taking out the total cost of vehicle ownership from your pre tax income reduces your taxable income at the end of the financial year. This is a popular product with all PAYG employees. .

An Operating Lease is where you pay to use vehicle/equipment over a fixed period with one payment per month covering all costs associated with the vehicle/equipment. You may also choose this product if you do not necessarily wish to own the equipment at the end of the term, as you merely hand it back. Great product if you want to have a fixed CapEx expense every month.

Rental Finance

This finance is best suited to those clients that:

  • Have just commenced in business and have no trading history but good work contracts moving forward
  • Need finance for rapidly depreciating equipment which will need to be replaced regularly
  • Require Off Balance sheet lending which will provide the equipment they need but only show as a rental cost to the business on the Profit & Loss, effectively reducing the companies taxable income
  • Has a tax debt and the major lenders will not consider them

Rental finance features:

  • Hand the equipment back at anytime if no longer needed
  • Payments are tax deductible thus reducing the companies taxable income
  • Your choice of equipment from your supplier
  • Equipment up to $500,000 considered
  • Payout the finance at anytime or annually
  • With each monthly payment you are growing your equity in the equipment so that you own the equipment for $1 at end of term (lenders options vary)

This type of equipment finance is growing in popularity as it allows business’s to start up and provides the required equipment to enable a business to prosper. Quite often without this type of finance, many business could not even start up.

Contact Us for the best equipment finance deals today. Give us a call 02 9453 0300 to discuss your options.

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