Asset Finance
Investment via frequent purchases of new or used vehicles, plant and machinery or office equipment is often necessary to grow and take advantage of new technologies and increase efficiency. We've access to a wide range of financing options and can sit down and discuss the merits of each and what will suit you best. We want to understand your cash flow and replacement policy to figure out what term or seasonal profile is appropriate. We want to not only finance your next purchase but would like to have the right facility in place for you for the next 12 months, to save you time. From printing machines and production lines to a new telephone system or fixtures and fittings, we've got it covered.
If you are bringing in equipment from overseas, we can also assist you and protect against exchange rates and provide suppliers with certainty of funding. Payments are structured over an appropriate term and may include a Letter of Credit initially to be replaced by some asset funding and can include a residual payment to suit your cash flow if required.
If you've an ABN and are a home owner, then you may be eligible to apply for funding without producing any financials, via your business.
There are a number of ways to structure asset finance. The most common ones are below. We can discuss with you your individual situation and we're happy to work alongside your accountant to ensure it suits your business from a tax or accounting perspective. Check out our calculator below to give you an idea of your repayments:
If you are bringing in equipment from overseas, we can also assist you and protect against exchange rates and provide suppliers with certainty of funding. Payments are structured over an appropriate term and may include a Letter of Credit initially to be replaced by some asset funding and can include a residual payment to suit your cash flow if required.
If you've an ABN and are a home owner, then you may be eligible to apply for funding without producing any financials, via your business.
There are a number of ways to structure asset finance. The most common ones are below. We can discuss with you your individual situation and we're happy to work alongside your accountant to ensure it suits your business from a tax or accounting perspective. Check out our calculator below to give you an idea of your repayments:
Lets take a look a each method of financing:
Commercial Hire Purchase
Also known as an "Offer to Hire", this is a simple facility where you effectively "hire" the equipment from the finance company for a fixed monthly
repayment over a fixed period and then at the end of the agreement, you get ownership of the asset. You can get up to 100% funding of the invoice value or contribute a deposit. Depreciation on the asset and the interest component is usually tax deductible if it is used to generate assessable income or the expense is incurred in running a business.
Repayment terms can be from 1 - 7 years and it's possible to include a residual value (balloon) to reduce the repayments. Repayments can be flexible with options of monthly, quarterly, half yearly, annually or seasonally to accommodate your cash flow. The interest rate is fixed so your costs are known in advance. GST is claimable on the purchase price of the asset, fees and the term charges (interest) . It's possible to included GST in the amount financed. No GST is payable on the repayments nor balloon. You have the ability to repay the finance agreement early although penalties may apply.
repayment over a fixed period and then at the end of the agreement, you get ownership of the asset. You can get up to 100% funding of the invoice value or contribute a deposit. Depreciation on the asset and the interest component is usually tax deductible if it is used to generate assessable income or the expense is incurred in running a business.
Repayment terms can be from 1 - 7 years and it's possible to include a residual value (balloon) to reduce the repayments. Repayments can be flexible with options of monthly, quarterly, half yearly, annually or seasonally to accommodate your cash flow. The interest rate is fixed so your costs are known in advance. GST is claimable on the purchase price of the asset, fees and the term charges (interest) . It's possible to included GST in the amount financed. No GST is payable on the repayments nor balloon. You have the ability to repay the finance agreement early although penalties may apply.
Chattel Mortgage
This is the most popular choice as it allows you instant GST benefits if you account for GST on a cash basis. Unlike Commercial Hire Purchase, you become the legal owner from the date of purchase and the lender has a registered charge over the asset. Up to 100% funding (including GST) is available meaning your funds can be better used elsewhere. Repayment terms can be from 1-7 years and no GST is charged on the monthly repayment, balloon or term charges (interest). Repayments can be flexible with options such as monthly, quarterly, half yearly, annually or seasonally. The interest rate is normally fixed so you have peace of mind in knowing your costs. A tax deduction is available for business use. There are low establishment and ongoing monthly fees. You have the ability to repay the finance agreement early although penalties may apply.
Finance Lease
With a finance lease, the finance company purchases the equipment and then "leases" to you. You get the benefit of using the asset for the agreed term in return for the rental payments. It may also available for equipment you have purchased in the last 6 months (known as "sale and leaseback"). At the end of the lease, you have two choices. You can:
There is no GST on the initial asset purchase. GST is payable on the rental payments over the term of the contract and on the residual value at the end of the contract. If you are eligible you may be able to claim the GST as an Input Tax Credit each month or quarter.
- Return the equipment to the finance company who will sell it (you will pick up any shortfall if it does not fetch the agreed residual value)
- Make an offer to the finance company to purchase the equipment
There is no GST on the initial asset purchase. GST is payable on the rental payments over the term of the contract and on the residual value at the end of the contract. If you are eligible you may be able to claim the GST as an Input Tax Credit each month or quarter.
Line of Credit
If you're planning ongoing regular capital expenditure, then this could be for you. Once established this facility is available at any time and saves having to underwrite each purchase. Provided your overall exposure remains within the facility limit, you can draw down on this pre-approved facility for that next purchase, giving you time to focus on your business rather than having to spend time organising finance. They are simply to organise and normally are structured as a Chattel Mortgage facility. The minimum line size is around $500,000 but we are always happy to discuss smaller facilities below this level on a case by case basis.
Operating Lease
A simple form of financing where the operating lease consists of two parties: (a) the company, known as "the lessee" and (b) the finance
company known as "the lessor". It's similar to a Finance Lease in that the finance company purchases the equipment and you agree to make rental payments. At the end of the lease term which is usually 5 years, the company can choose whether to purchase the leased assets for an agreed value, upgrade the assets in the lease to new ones, extend the lease or hand the assets back.
Operating leases have fixed monthly rentals. The interest rate is fixed for the term of the facility. The operating lease rentals are tax deductible as an operating expense provided the asset is used for business purposes. The main difference with an operating lease and other forms of finance is that it's not recorded on your balance sheet nor does it appear as a liability. This can be particularly beneficial if your balance sheet is weak or you have financial covenants with your bank which may be impacted by traditional funding methods.
There are two types of Operating Lease - Fully Maintained and Non - Maintained. As it's name suggests, "Fully Maintained" means all servicing and maintenance is included in the single monthly rental whereas "Non-Maintained" means you are responsible for the servicing and maintenance of the asset.
You may able to claim GST back on the rental and other charges that are subject to GST.
company known as "the lessor". It's similar to a Finance Lease in that the finance company purchases the equipment and you agree to make rental payments. At the end of the lease term which is usually 5 years, the company can choose whether to purchase the leased assets for an agreed value, upgrade the assets in the lease to new ones, extend the lease or hand the assets back.
Operating leases have fixed monthly rentals. The interest rate is fixed for the term of the facility. The operating lease rentals are tax deductible as an operating expense provided the asset is used for business purposes. The main difference with an operating lease and other forms of finance is that it's not recorded on your balance sheet nor does it appear as a liability. This can be particularly beneficial if your balance sheet is weak or you have financial covenants with your bank which may be impacted by traditional funding methods.
There are two types of Operating Lease - Fully Maintained and Non - Maintained. As it's name suggests, "Fully Maintained" means all servicing and maintenance is included in the single monthly rental whereas "Non-Maintained" means you are responsible for the servicing and maintenance of the asset.
You may able to claim GST back on the rental and other charges that are subject to GST.
Novated Lease
Retention of good staff is always tricky, so why not offer them "novated leasing" as part of a salary package benefit to employees. The employee chooses a vehicle and leases it from the finance company. It in turn, "novates" the lease to your business which assumes responsibility for
making repayments so long as the employee remains with you. If he/she leaves the business, then normally the car remains with the employee and
either they or their new employer takes over the repayments.
It's only available for vehicles that have a carrying capacity of less than one tonne and seat less than nine people. A three way agreement
between you, your employee and the finance company is entered into which allows for the car to be treated as a company car for tax purposes, which can provide the employee with significant income tax and GST savings. They'll pay one amount each month which is calculated to include their fuel, insurance, all running costs and the finance for the car of which comes out of both their pre-tax salary and post-tax salary
(to cover FBT). Because the finance company claims the GST on the vehicle and running costs, it passes this on to the employee by way of a
reduced monthly repayment, saving potentially thousands over the period of the agreement.
The vehicle is registered in the employee's name so there is no stamp duty. If the vehicle is purchased at the end of the lease they only pay GST on the residual value at the end of the lease. The employee can choose to pay out any residual finance or hand the vehicle back (which needs to be within the mileage and in the condition agreed) and take out another agreement.
If you have staff earning more than $25,000 per annum, and mostly use their cars for personal use, then as an employer, this could be a great way of keeping them in your car park rather than your competitors.
making repayments so long as the employee remains with you. If he/she leaves the business, then normally the car remains with the employee and
either they or their new employer takes over the repayments.
It's only available for vehicles that have a carrying capacity of less than one tonne and seat less than nine people. A three way agreement
between you, your employee and the finance company is entered into which allows for the car to be treated as a company car for tax purposes, which can provide the employee with significant income tax and GST savings. They'll pay one amount each month which is calculated to include their fuel, insurance, all running costs and the finance for the car of which comes out of both their pre-tax salary and post-tax salary
(to cover FBT). Because the finance company claims the GST on the vehicle and running costs, it passes this on to the employee by way of a
reduced monthly repayment, saving potentially thousands over the period of the agreement.
The vehicle is registered in the employee's name so there is no stamp duty. If the vehicle is purchased at the end of the lease they only pay GST on the residual value at the end of the lease. The employee can choose to pay out any residual finance or hand the vehicle back (which needs to be within the mileage and in the condition agreed) and take out another agreement.
If you have staff earning more than $25,000 per annum, and mostly use their cars for personal use, then as an employer, this could be a great way of keeping them in your car park rather than your competitors.
So, if it's about time you invested in some new plant or machinery, then give us a call and lets have an informed discussion about your needs.
