The Facts about Equipment Finance
What is Equipment Finance?
Equipment finance is the funding of all types of equipment used predominantly for business use. By funding the equipment over terms up to 5 years, it allows businesses to finance capital purchases without effecting their working capital.
Why use Equipment Finance?
- Deal size range from $5,000 to multimillion-dollar transactions
- Can be used for all business structures
- Applicable to all industries
- Can be used for start-up businesses
- Efficient approval and settlement
- Funding for 100% of the purchase price, including GST
- Terms up to 5 years (7 years in certain circumstances)
- No additional property security or registered mortgage debentures required (in nearly all cases)
- Fixed repayments for the term
- Tailored monthly payments
Types of Equipment that can be Financed
- Yellow Goods – Earthmoving, Construction, Mining and Machinery
- Agricultural Equipment – Tractors, Headers, Sprayers, Air Seeders and Hay Balers
- Medical Equipment – Diagnostic Instruments, Endoscope Technology and Imaging Systems
- Haulage Equipment – Prime Movers, Tray Trucks, Refrigerated Pantechs and Tipper Trailers
- Marine – Yachts, Pleasure Craft, Commercial Fishing Boats, Charter Boats
- Specialised Equipment – Gym Equipment, Solar Systems
- Office Equipment – Computers, Software, Furniture, Printers and Phone Systems
- Automotive – Cars, Utes, Trucks and Trailers
What Finance Products are available?
With an asset lease agreement, you lease the equipment from the lender and pay a fixed amount each month for its use. At the conclusion of the contract, you can take ownership of the equipment by paying off the residual on the lease, refinance and extend the lease term, or sell the equipment. A major advantage to the asset lease method is that it does not appear on your accounting books as an asset, potentially saving you some extra cash in tax.
The lender will give you the entire amount for the equipment, allowing you to purchase it outright. However, you will have to pay the loan back in instalments, much like a mortgage on a house. The purchased piece of machinery is security on the loan. Once the loan has been paid off, you retain ownership of the equipment.
With an equipment rental, the lender purchases the equipment and rents it back to you. At the end of the agreement you may renew the lease agreement, purchase the equipment or hand the equipment back to the lender.
The advantage of renting the equipment is particularly useful when you are renting equipment that only has a short lifespan eg. laptops. In addition, all payments are tax deductible.
Always consult your Financial Advisor or Accountant prior to making any decisions on the product that will suit you.
Benefits of Equipment Finance
- Improves cash flow as you are making regular, fixed repayments rather than buying outright
- Improves working capital
- Avoids the need to invest capital/cash in equipment but still allows the business to operate effectively
- Maximises business efficiency
There are a number of different ways to finance your equipment purchases. At Mildura Finance we can help untangle the web of different products, terms and structures to provide you with clear options that suit your business needs. Contact our helpful consultants today.