Finding equipment finance business loans can be tricky. This is specifically the case when you’re trying to run your business successfully at the same time.
It takes more than just comparing rates and terms to secure an equipment finance option that’s right for your business.
By speaking with a mortgage broker, you can significantly improve the chances of capitalising on the best deal.
What you need to know about equipment finance
You’ll have cash flow and taxation implications whether you purchase equipments from your available cash flow or finance them. What’s best for your business depends on your current situation.
You can find equipment finance business loans for:
- Cars, trucks, buses and utilities.
- Forklifts, cranes and similar equipment.
- Computers and office equipment.
- Printing, medical and manufacturing equipment.
- Industrial plant equipment including those for the mining and forestry sectors.
- Civil equipment such as concrete pumping and quarry equipment.
- Earthmoving equipment such as trenchers and excavators.
Other equipment such as gaming equipment and arboricultural equipment can also be financed. A single lender may not offer finance for all of the above equipment so you need to apply with the right lender.
What options are available?
The introduction of Goods and Services Tax (GST) has changed business equipment finance options over the years. This is because GST affects the cost-effectiveness of traditional equipment finance for many businesses.
Depending on your business situation and goals, you can choose from several options, such as:
- Purchase: You can buy the equipment using your own money. This allows you to claim depreciation as long as the equipment is used to generate assessable income. However, you won’t be able to capitalise on any taxation benefits that may be available if you were to finance it. Note that this can potentially put undue pressure on your cash flow.
- Finance lease: You can negotiate a commercial purchase price of the equipment with a lender. The lender purchases the equipment and leases it to you for an agreed term. Lease rentals are tax deductible as long as the equipment is used to generate assessable income. You can also claim the GST component of the rental in your Business Activity Statements (BAS).
- Commercial hire purchase: This is also called asset purchase and is similar to finance lease. However, your business immediately owns the equipment once the final payment is made.
- Novated lease: If you need finance for a vehicle, you can choose to get a novated lease. This allows your employees an option to lease a vehicle of their choice and retain ultimate responsibility for it. You can then make lease payments on behalf of the employee by making deductions on their pre-tax income.
- Chattel mortgage: This equipment finance option is closest to a standard property mortgage because of its structure. The equipment will be owned by the business but will be used as the primary security against the loan. After the lender makes the payment to the supplier, you may be able to claim the GST component of the purchase price of the equipment in your next BAS statements. Also, the interest and depreciation are usually tax deductible if the equipment is used to generate assessable income.
It’s recommended that you speak with your accountant or an independent tax advisor before you make any decisions.
We have mortgage brokers that specialise in equipment finance business loans. You can call us on 1300 889 743 to speak with one of our mortgage brokers about what options are available. You can also fill in our free online assessment form.
How can I qualify for an equipment finance business loan?
Lenders consider many things when assessing equipment finance business loans. This generally includes your business experience, business type, your capital as well as the equipment itself. The severity of assessment may depend on the level of finance required.
Lenders rank businesses from 1 to 15 and applications usually from A to D. Extremely strong businesses can get a 1A rank. A new business may get a 15D rank and get declined.
Prepare yourself before applying for equipment finance. This way, your confidence and knowledge in the industry can help you qualify.
Even if you have a low risk, high profit business, you may not qualify if the lender can’t see that.
Where can I find equipment finance interest rates?
Most lenders don’t publish the interest rates on their equipment finance options. This is mainly because it depends on a number of factors.
The option you choose, the type and age of the equipment as well as the term of the agreement affect the interest rate.
However, you can check out the rates on other business loan options on our business loan interest rates page.
Why should I use a mortgage broker?
Mortgage brokers aren’t tied with a particular lender. This way they can help you compare and choose a range of lenders and products.
The market is always changing and new products are always coming up. A specialist mortgage broker can help you choose an option that suits your business.
If you want to learn more about why to use mortgage broker, you can check out the why to use a mortgage broker infographic.
You can call us on 1300 889 743 or complete our free online application form and speak with one of our specialist mortgage brokers.