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Specific Security Agreement (Chattel Mortgage)

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What is a Specific Security Agreement (Chattel Mortgage)?

Small to medium-sized businesses that account for their business using the Cash Method can benefit from a Specific Security Agreement (formerly Chattel Mortgage) facility.

You have full use of the equipment during the term. You have the security of a predictable monthly payment. Include either a deposit or an end of term “balloon / Residual” to lower the monthly payments.

Unlike other products, however, you have ownership of the equipment from the beginning. In other words, the loan is secured by a mortgage over the equipment.

Specific Security Agreement/ Chattel Mortgage Features

  • Subject to credit approval, finance 100% of the purchase price
  • The financed equipment is all the security required in most cases
  • Standard Terms range from 3 years to 5 years but can be varied to up to 7 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

Specific Security Agreement/ Chattel Mortgage 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.

What does Balloon mean?

A balloon is an 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. This means once the final payment is made there is nothing else to pay.

 

A balloon is an amount that will need to be paid at the end of the term (much like a residual on a lease). A balloon in your agreement lowers the payments.

This might better suit your cash flow. Whether you have a balloon or not is entirely up to you. However, you may choose to pay the loan down to zero. Therefore, once the final payment is made there is nothing else to pay.

Other Equipment Finance Options

A Chattel Mortgage might not be the best option for your business. We can also assist with the following alternatives:

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

Check out our Equipment Finance Options Page or our Commercial Finance Page for all our commercial finance options.

If you need a competitive Specific Security Agreement (formerly Chattel Mortgage), contact us online or call 02 9453 0300 and learn how we can help you groww your business.