Commercial Hire Purchase
What is Commercial Hire Purchase (CHP)?
CHP is a financing option that allows businesses to acquire essential equipment or vehicles by spreading the cost over a fixed term through regular installments.
Ownership vs Leasing: Unlike a lease, where ownership remains with the lender, CHP typically transfers ownership of the asset to your business upon completion of all repayments.
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Key Features of CHP:
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Finance up to 100% of the asset's value: This includes GST, allowing you to acquire the equipment you need without a significant upfront investment.
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Fixed interest rates: Predictable budgeting with fixed interest rates throughout the loan term.
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Flexible repayment structures: Choose repayment options that fit your cash flow, including balloon payments (larger final payment).
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Immediate asset use: Start using the equipment or vehicle for your business operations while making repayments.
Benefits of Commercial Hire Purchase
CHP offers several advantages for Australian businesses:
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Preserves working capital: Free up valuable capital for other business needs like marketing or inventory.
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Potential tax benefits: Consult a tax advisor to explore potential tax deductions on interest payments and depreciation of the financed asset.
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Improved operational efficiency: Gain access to essential equipment to enhance productivity and growth.
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Flexible repayments: Tailor your repayment plan to align with your business's cash flow cycles.
When to Consider CHP
CHP is a suitable financing option for businesses in various situations:
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Acquiring new equipment or vehicles: Finance essential assets for your core operations or expand your service offerings.
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Replacing outdated or malfunctioning assets: Upgrade your equipment to maintain efficiency and avoid costly disruptions.
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Expanding operations: Secure additional equipment needed to support your business growth.
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Limited upfront capital: CHP allows you to acquire necessary assets even with limited upfront capital.
How a Finance Broker Can Help
A qualified finance broker streamlines the CHP process and helps you secure the best deal.
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Product knowledge: Brokers explain CHP compared to other financing options like loans or leases, ensuring you choose the most suitable solution.
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Lender comparison: Brokers have access to a wider range of lenders offering competitive CHP rates and loan terms.
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Streamlined application: They guide you through the application process, saving you valuable time and effort.
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Negotiation power: Brokers leverage their expertise to negotiate favorable interest rates and loan structures on your behalf.
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Fast approvals: Brokers can expedite the application process, allowing you to access funding quicker.
FAQs (Frequently Asked Questions)
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What types of assets can be financed through CHP? A wide range of assets can be financed through CHP, including machinery, vehicles, technology equipment, and more.
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What are the typical repayment terms for CHP agreements? Repayment terms typically range from 12 to 60 months, depending on the asset value and your agreement with the lender.
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What are the early termination fees for CHP? Some CHP agreements may have early termination fees if you choose to pay off the loan before the end of the term.
Disclaimer: This information is intended for general informational purposes only and does not constitute financial advice. Please consult with our finance brokers before making any financing decisions.