Equipment finance can be a great funding solution for small and medium sized businesses. The approval process is typically quick and painless, the interest rate and repayment terms are attractive, and the loan requires no personal asset property as security.
There are different types of equipment finance options such as an operating lease, chattel mortgage and finance lease. There are a few key factors to consider in the decision of which is the most suitable for your business including tax deductibility, GST and expected life span of the asset. This decision will essentially be based on whether it makes more sense to own or lease the equipment and the related costs and benefits of the different options.
So what equipment can my business borrow against?
CreditSME deals with a broad range of bank and non-bank lenders that provide equipment finance solutions and as such, most equipment used by businesses can be funded.
The most favoured items of equipment for lenders to fund are equipment that has a unique identifier such as a serial number, is mobile or at least not permanently fitted to a building/premises, is new and has been purchased through a dealer/distributor and will contribute to increased revenues and profitability of the business.
The type of equipment that fits the above criteria will typically enable very attractive interest rates and terms from lenders. Other equipment that lenders like to fund and will attract low interest rates are assets for which there is a large, active and transparent resale market. These types of assets include motor vehicles, trucks and trailers, forklifts, medical equipment, earthmoving equipment, manufacturing equipment, industrial plant and agricultural equipment.
Whilst the above assets may be more straight forward from a lender’s perspective, the vast majority of equipment used by businesses can be financed. This can range from a new fit out of a shop or office, new software systems, a security system and varying forms of office equipment.
What will equipment finance cost?
The cost of equipment finance will be largely determined by the type of equipment being purchased, the size of the equipment finance facility and the financial profile of a business.
Funding for the mainstream assets outlined above typically starts from the low 4% p.a range for the larger ticket items and moves up from here. The monthly repayments will then be determined by this rate and other terms of the facility such as term, any up-front deposit or back end balloon and timing/frequency of repayments.
There are also low doc equipment finance options available to businesses that will incur a slight premium though can still be an effective form of business funding. Low doc equipment finance is particularly useful to companies that might be a little behind in the financial reporting or have an ATO tax debt.
All in all, equipment finance can be a very cost effective form of funding and help support the growth of a business. Funding can be arranged very quickly (often in 1-2 days) on interest rates close to those that business owners will be used to seeing on their home loan. CreditSME is experienced in arranging equipment finance for small and medium sized businesses so apply online or call us today to see what funding options are available to your business.