Business equipment loan essentials

What financing options are available?

The most common product for financing assets is a motor vehicle or equipment finance facility. Under this arrangement, usually with a bank, your business owns the asset, while the lender holds it as security in the event of default.

Alternatively, you may choose to enter a hire arrangement or operating lease with a lender. These arrangements may potentially provide you with additional flexibility to own or upgrade the asset at the end of a lease or hire term that is, you effectively rent the item of equipment from the lender at an agreed rate for an agreed period, after which you can either choose to return it, purchase it outright by paying the remaining balance or refinance the remaining balance over a further term.

As Bruce Debenham, Perks Director of Banking and Finance explains, there are some key differences between hire and lease arrangements that will determine which is suitable for your business.

“It really depends on your individual circumstances and the type of asset you’re after as to which will be the right option. It may be that for something like a vehicle, you want to enter into an operating lease arrangement, which will provide you with greater flexibility to upgrade in the future, while certain plant and equipment might have a longer useful life and could better fit the profile of an equipment loan.”

However, as Bruce notes, the eligibility of certain assets will depend on the individual lender and type of finance arrangement you seek.

“Certain assets may not be eligible for finance. For this reason, it is always best to discuss the assets and the funding you need to acquire those assets with a commercial finance broker who will have access to a wide variety of lenders and be able to assess the most suitable option for your business,” he says.

“Funding the cost to purchase plant and equipment is no different to any other key business decision – you really need to do your research and take the time to investigate the best option.”

Negotiating the best deal

Dealing with lenders can be a time-consuming process and the back and forth can take hours and days of your time – time that is better spent focusing on your business operations.

This is where it can be potentially beneficial to engage the services of a financial broker. With access to many lenders, a broker can manage the entire process on your behalf, making sure that the process of negotiating finance is as painless and efficient as possible. This includes sourcing and assessing rates, terms and facilities from a wide network of lenders. A broker is well positioned to give advice on which equipment finance options are best suited to your business, taking into account all aspects of your current situation. Importantly, brokers can also help ensure that you don’t get caught out by any unexpected clauses or conditions which could impact the overall cost during and at the end of the finance term.

We’ll help you dot the I’s & cross the T’s

When it comes to securing a loan for your business, there are a lot of steps you need to take to in order to apply for and successfully acquire finance without delay. Having an expert assist you with the process to ensure you’ve submitted all the necessary supporting documents can be key to a seamless lending process.

Benefit from our big bank connections

Banking relies heavily on relationships and our commercial loans team have a breadth of industry experience, including working in some of the big four banks. These experiences and relationships built over time ensure we understand what you need to do to get access to finance quickly and at the best available rate.

Go to a one-stop-shop

In a highly competitive lending market, there are many options available for business owners seeking finance. It can however, be an incredibly time-consuming process to seek out the best rate from so many different lenders. With access to more than 30 bank and non-bank lenders, our Banking and Finance team will cast the net wide to help find the best option for your individual finance requirements.

Get a relationship going

Relationships are vital in banking but not all relationship managers are created equal. Ensure you have someone in your corner who is acting in the best interests of your business objectives and not just trying to sell you a certain product. This is vital for your peace of mind and ensuring that you get the right business loan to suit your individual needs.

Capitalise on the opportunity of now

With many businesses hunkering down in an effort to ride out the pandemic, this year presents a unique opportunity for savvy business operators to map out a strategy that will get them ahead of the pack.

Sam Wagner, Director, Accounting notes that those business owners who plan ahead now will be the ones to emerge stronger out of this economic downturn.

“For those that are using the time productively to strategise their businesses plan in a post-pandemic world, there will be many opportunities to be found.”

“Importantly, for those eager to pursue growth or to increase your business’ efficiency by upgrading equipment, now is the prime time to be making those investments.”

“Given the current low-rate environment, there is certainly a strong case to be made for key asset purchases aligned to broader strategic imperatives. The fact that you can receive the full tax deduction before you have finished paying for the asset provides a short to medium term cashflow benefit. This is a rare opportunity for business to take advantage of.”