Choosing the right type of asset finance can help save you time and money to invest in growing your business. You can also reduce the risk of owning obsolete equipment and there can be various tax outcomes too.
Alecto Finance consultants can assist you and your business with sourcing the right finance solution.
Generally speaking, the main types of asset finance are: Commercial Hire Purchase, Chattel Mortgage, Finance Lease and Operating Lease or Rental.
Each is suited to different commercial circumstances, so when considering your options, you may want to talk to your accountant or tax advisor.
Below is an introduction to these main types of asset finance.
Commercial Hire Purchase
With this type of finance, you hire and use the asset until the last payment. When you make the final instalment, title of the asset transfers to you. You can tailor payment options, including the loan period, a deposit and a larger final balloon payment. To help manage your cash flow, structured payments can be established according to your cash flow.
Chattel Mortgages are a popular finance solution where you own the asset from the outset and your loan agreement is secured by the asset. You can tailor your loan payments by choosing the term — typically up to five years. Other payment options can include a deposit and a larger final instalment. You can also structure payments to free up cash flow at the times of year you need it most.
With a Finance Lease, the financier owns the asset however you bear the risk of disposal (of the asset) at the end of lease. This type of lease can benefit businesses that need the latest vehicles or equipment without tying up a large amount of capital. You can choose lease payments in advance or arrears and terms up to five years. A residual value is required in line with the asset’s use and the Australian Taxation Office’s guidelines.
Operating Leases can often be used to fund a number of different asset. Payments towards this type of finance can sometimes be considered operating costs and will not appear as a liability on your balance sheet.
Examples of assets financed:
Xray, ultrasound, MRI and other types of medical imaging equipment
Dental chairs and equipment
Gym and pilates equipment
Technology such as phone systems, computers, printers and servers
Office fitouts and signage
Commercial kitchen equipment