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Equipment Finance

Equipment Finance is a good option for a business which does not have the resources to buy equipment outright and which can generate higher profits from investing its cash in its working capital, stock, work in progress and debtors.

The choice of equipment finance is dictated by two considerations - cash flow and tax.

Below is a snapshot of the alternatives. For the purpose of the exercise a number of assumptions have been made, including that the equipment is used to generate assessable income. In all situations what is best for your business will very much depend on your circumstances at the time. Interest rates may also vary between the alternatives and from time to time.

There are basically three types of finance available to facilitate the purchase of equipment for business use – Operating Lease, Finance Lease (Hire Purchase) and Chattel Mortgage.

The table below sets out a summary of these alternatives.

	Lease	Asset Purchase	Chattel Mortgage
Description	The finance company buys the equipment and leases it to the business.	The finance company buys the equipment and sells it to the business over an agreed term.	The business buys the equipment outright from the supplier – funded by Chattel Mortgage financed by bank.
Term	2 to 5 years	2 to 5 years	2 to 5 years
Ownership during term	Finance company	Finance company	Business
Tax-Deductible	On lease payments	On interest component of loan Depreciation of Equipment	On interest component of loan Depreciation of Equipment
GST	On lease payments	On the amount financed.	On the amount financed
Ownership at term	Finance company	Business	Business
Other considerations	Any shortfall on resale by financier is guaranteed by the lessee (business)	Payments are higher than lease as they include purchase payments. Depending upon term and repayment levels there may be no or some residual (balloon) payment.	Mortgage may be interest only or principal and interest. Any outstanding principal to be repaid at end of term.

Use our simple three step process to find and apply to as many Banks as you like with just one application form.

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BizExchange understands that whether you are buying or selling a business, business financing is a likely consideration. We also know that finding the right person at the bank to deal with your issues is not always as easy as it should be.

This is why we have established relationships with a range of financial providers so that you can complete one form and have it received by the right person at each of the institutions you have nominated. Not only that, we know their lending criteria, so we will only present you with the banks that are prepared to consider your application.