Funding faq's

FAQs

What is a Chattel Mortgage?

A Chattel Mortgage is essentially a Mortgage over goods to be financed and is classed as a cash sale in that the goods automatically become yours on purchase and the finance company takes a mortgage over the chattels. However for tax purposes you can claim depreciation, running costs and interest paid, against your business income. The Chattel Mortgage allows businesses to claim the full input tax credit from GST incurred expenses immediately (next BAS statement).*

The Chattel mortgage is a very flexible finance option, in that, you have the ability to either finance the full purchase price or alternatively, you can include an upfront deposit or trade-in to reduce your rental commitment, while a Residual payment may also be placed at the end of the term (much like a lease residual) to represent the vehicles end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).

Who does a Chattel Mortgage suit? A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting for BAS (they record business income and expenses as and when they occur) as it allows them to claim the GST in the asset's price up-front. Where the customer is registered for GST, they can claim some or all of the GST contained in the vehicle price as soon as they lodge their next BAS, rather than over the term of the loan.

What is a Commercial Hire Purchase?

A commercial hire purchase (CHP) also known as Asset Purchase, is a contract where the Financier gives you possession and use of an item of equipment in return for regular payments. When the final payment is made, the hirer owns the goods. With Hire Purchase, however for tax purposes you can claim depreciation, running costs and interest paid, against your business income. You may also be able to claim the GST component of your purchase in your next B.A.S Statement depending on how you remit your GST (cash or accrual).*

You also have the option of including an upfront deposit or trade-in to reduce your rental commitment, while a balloon payment may also be set at the end of the term (much like a lease residual) to acknowledge the vehicles end value. Alternatively, you may choose to structure your rentals to clear the debt in full over the term of your agreement (fully amortised).

Who does a CHP Suit: A Commercial Hire Purchase (CHP) is suitable for companies, partnerships and sole traders who account for GST on an Accruals basis, and individuals using the vehicle for business purposes.

What is a Novated Lease?

A novated lease is a particular type of finance lease used by individuals for the specific purpose of purchasing a new or used vehicle. Similar to a car lease, it involves obtaining finance for a new or used vehicle in return for regular repayments over a fixed period of time. The difference is that your employer agrees to make the payments out of your pre-tax salary. Therefore a novated lease is a three way agreement - between you, the employee, the finance company and your employer. The employer must commit to making the repayments whilst you are employed by them, although if you cease employment, the vehicle ownership as well as the finance commitments remain with you.*

Who does a Novated Lease Suit? A Novated Lease will suit any employee who wants to include a motor vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees.

Finance Lease

A lease is a particular type of finance used by businesses for the specific purpose of purchasing new or used equipment or motor vehicles. The asset acts as security against the loan of the funds. This means that interest rates from lenders are generally more competitive as the risk of outright loss by the financier has been reduced.

A Finance Lease is a contract where the Financier purchases the equipment and leases to you for an agreed term and rental. A Finance Lease or Car Lease is a commercial finance product which enables the customer to have the use of a car or commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle. A Finance Lease can also be known as an Asset Lease or Vehicle Lease.*

Who does a Lease suit? Leasing is suitable for companies, partnerships, sole traders and individuals where the leased asset is used for income producing purposes. It provides deductions via the claiming of the lease payments which may be greater than comparable CHP or Chattel Mortgage arrangements, ie a faster amortisation of the debt, subject to tax guidelines.

Rental

This finance solution is ideal for technology equipment and other such equipment which depreciates rapidly as it allows the renter to avoid owning and disposing of obsolete equipment. For tax purpose, equipment rental can work to the renter's benefit with payments deducted as an operating expense.
Additionally rental facilities also known as OPERATING LEASES are often used by large organisations and Government entities to acquire a broad range of assets under a monthly HIRE EXPENDITURE account as opposed to a CAPITAL account. This allows much needed assts to be acquired where constraints on CAPITAL Acquisitions apply.

No deposits or balloon payments, There are no deposits or balloon payments, instead clients simply make monthly rental payments and have the option to choose one of the easy end of the term options.

  • Easy end of term options, At the end of the term clients have the option to choose what they want to do with the equipment:

    • Keep on renting it (often at a reduced rate)
    • Upgrade the equipment
    • Offer to purchase it from the financier at its fair market value.

Affordable monthly repayments, Affordable monthly payments spread the cost of equipment over its useful life. Clients can chose from a flexible rental plans over 2 to 10 years. *

Sale and Finance/Leaseback

An ideal tool which can be utilised to restructure existing equipment finance facilities, assist in REPOWER arrangements or full RETROFIT/REBUILD programs of existing assets. This can be utilised via any finance product and is an ideal way of utilising existing assets to secure the finance of their subsequent upgrades.*

*N.B. Information contained on this page does not take into account your specific circumstances. You should seek confirmation from your accountant.

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