What types of equipment finance can my business get?

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This article brought to you by Savvy Finance.

What types of equipment finance can my business get?
The most popular type of commercial loan to buy agribusiness equipment is the chattel mortgage and the hire purchase.

We all know our business runs on machinery and equipment – any modern agribusiness needs harvesters, tractors, loaders, and feeders. We don’t need to tell you these can be expensive and require finance to obtain.

What are the types of equipment finance on offer and what’s best for your business?

We talk to the experts and find out.

Buying your equipment – chattel mortgage and hire purchase

The most popular type of commercial loan to buy your agribusiness equipment is the chattel mortgage and the hire purchase. The chattel refers to the equipment and the "Mortgages" are registered by ASIC as an "fixed and floating charge" or the loan agreement. When your business finances the equipment, you gain ownership over the equipment, listing it as an asset on your books.

Chattel mortgages give you tax advantages. You can the GST on the purchase price. You can also claim the fuel input tax credit. Over the life of the loan, you can claim the interest paid on your repayments. You can also claim depreciation up to the depreciation limit.

Hire purchases are similar in almost all aspects except where the ownership lies. The ownership is retained by the bank until the loan is paid off. This is good for "off the books" accounting and counts towards operating costs. The lender will usually claim the GST, etc. and pass on the savings to you.

Chattel mortgages also allow you to borrow more than the purchase price so you can amortise or smooth out payments of other costs such as registration, training, or scheduled servicing. You can also set a balloon payment to offset regular repayments. More on that later.

Leasing your equipment

If you have a bumper harvest or don’t see the need to keep your equipment, you can choose an operating lease.Operating leases give you the flexibility to use equipment in exchanged for fixed-term repayments across a lease term. Operating costs are deducted as expenses and the equipment is returned to the dealer or financier at the end of the lease. In leases, you will usually not have to pay for maintenance, servicing, and other costs.

The middle ground – the finance lease

A finance lease is a type of lease which gives you the option to buy the equipment at the end of the lease term. You can purchase the equipment by paying out the residual value – known as a balloon payment in loans – trade in the equipment for new equipment or dispose of the equipment.

What is best?

Savvy Managing Director and business finance expert Bill Tsouvalas says this all depends on how your business does its accounting. "Some businesses want to keep assets on their books while others don’t; some seasonal businesses like the flexibility of leasing because it means they don’t have to keep equipment that doesn’t earn them profit. It can be confusing, so you should always consult an equipment finance broker so they can help find the best package that suits your business and method of accounting."


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