Do you need to purchase vehicles or income producing equipment for your business? Then there may be a way to get the equipment you need with the flexibility you want.
So what are Equipment Loans?
A loan agreement, where your bank provides your business with full or partial funding for vehicles or equipment and takes a mortgage over the asset until the end of the agreement. You own the equipment from the outset of the agreement, which means regardless of your GST accounting basis (cash or non-cash), you should be able to claim your GST as an input tax credit in your next Business Activity Statement (check with your accountant!).
So what are the benefits to Equipment Loans?
- Security is usually the asset itself – preserving access to working capital credit lines.
- No capital outlay – no up front deposit needed, which means you can use your working capital for other core business needs.
- Equity – by taking equity in the equipment through a trade in or deposit you can reduce the amount funded and therefore the total interest paid.
- Input tax credits and tax deductions – provided you are registered for GST, you should be entitled to claim an input tax credit for GST included in the price of the asset acquired. And generally, the interest you pay plus the depreciation of the asset should be tax deductible to the extent the asset is used in your business.
- Tailoring to match your cash flow – interest charging cycles and repayment cycles aligned with your anticipated cash flow.
- Simplicity – loan repayments will be automatically debited from your nominated business account.
What are the features to Hire Purchase?
- Most depreciable assets can be funded.
- Choice of interest rate types.
- Choice of payment options.
- You own the asset from the start of the agreement. Your bank will register a mortgage over the asset until the end of the agreement.
Important Facts* (Information provided by National Australia Bank)
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Interest rate: |
Available on application. |
Interest type: |
Agreements under $500,000
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Agreements over $500,000
- Fixed
- Variable
- Capped and collared
- Or, a combination of these.
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Minimum term: |
12 months |
Maximum term: |
72 months. Other terms can be considered on application. |
Minimum amount: |
Greater than $10,000 is preferred. |
Maximum amount: |
Unlimited |
Repayment options: |
Monthly, quarterly, half-yearly, annually, in arrears, in advance, or to match any seasonally-driven cash flow need. |
Security Required: |
Generally the security is the asset itself. The bank will take a goods mortgage over the asset (ASIC registered if given by a company), which is an assignment, by way of security, of legal title to the asset. A director’s guarantee and indemnity may also be taken as supporting security. Additional security might also be required – this will be assessed on your application. |
Related options: |
Commercial Hire Purchase
Finance Lease
IT Rental |
What it costs: |
Fees and charges are payable. You will need to request specific details from your bank or finance broker. |
Terms and Conditions: |
Terms and Conditions do apply. Request full details from your bank or finance broker. |
Where to from here?
The information for this article has been provided by NAB. For further information on how you can secure business financing for your business, please contact Andrew Halsey, Business Relationship Manager, Telephone: 08 9333 4147 and mention that you were referred by Innova Business. |
