There are numerous forms of finance available for businesses that require expensive equipment such as IT systems, machinery, and vehicles.
Each one delivers different benefits to the business and, prior to entering into a loan contact, it is important to understand which product will provide you with the best outcome.
Commercial Hire Purchases
Commercial Hire Purchases allow businesses to hire assets and then make payments until the asset is paid off in full. The asset’s title is then transferred to the business’s name, after the final instalment has been paid. If you are looking to own an asset long term, this is an ideal option. This option also allows for some flexibility, which can allow you to tailor your financing to your cashflow situation. It could allow you, for instance, to use a balloon payment, arrange for a larger final balloon payment, request a smaller or larger deposit upfront, or change the loan period.
Finance Lease.
A finance lease is useful to a business that needs the newest equipment or vehicles but is not interested in tying up most of its capital. Lenders own the assets with this type of asset financing, but the borrower bears the risk of disposal after the lease ends. Finance leases, like commercial hire purchases, have some flexibility in the terms and lease payments. Chattel Mortgage. Chattel mortgages allow you to own the asset from the get-go—which is the main reason it is such a popular option. With your loan secured by the asset itself, you can select the term and tailor your loan arrangements. Typically, the term is up to five years. It also allows you to vary other terms, meaning you have the option to customize by paying a higher final instalment or a higher deposit.
Novated Lease.
If you, as a business owner, want to include a vehicle with your salary package, a novated lease is the best asset finance option available to you. Both employer and employee sign a novation agreement in this financing option, which makes you both responsible for the loan. If you are an employee who wants to use a novated lease, you should work with your human resources department. The loan term for novated leases typically ranges from one to five years.
Operating Lease.
Your company never owns the vehicle when you get a fleet operating lease; instead, the financier owns it for the entire term (1-5 years), and you return the vehicle once the term comes to a close. Small businesses are usually the ideal candidates for fleet operating leases, with the fees for insurance, tires, registration, and maintenance included, which makes life easier for you and your finances.
Technology Rentals.
Technology rentals are appealing and financially sound for many smaller companies that find it difficult to pay upfront for the newest equipment. You can think of technology rentals like fleet operating leases, wherein you never own the equipment, and you return it at the end of a specified term, typically three years. The most attractive reason to opt for a technology rental is that your business will never be forced to own obsolete technology.
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