Choosing the Right Equipment Loan for Your Business
A business needs to make a number of purchases for executing its operations. These purchases can be for raw materials, vehicles and equipment. Making these purchases with a lump sum at a go is not possible for most and procuring a loan is the best solution for almost all businesses. In fact, a loan is a very helpful and suitable feature for any situation or purchase requiring a large sum of money, which is not possible to arrange for the business or individual.
The next step is to ascertain what kind of finance or loan will be right to choose from, in terms of the future of the business. And in this matter genuine equipment finance Sunshine Coast provider can help you a lot. These providers offer different kinds of loans from which borrowers can choose the one they need.
Different types of equipment loans
- The first one is a hire or purchase loan. This is like a rental agreement where once the terms of agreement have been fulfilled, the equipment or car becomes yours, unlike a lease agreement. Even though the ownership of the vehicle or equipment is transferred to you after the complete payment, you can claim depreciation of the vehicle and the interest paid for the loan from the business income. The commitment to pay the rent for the vehicle can be reduced by making an upfront deposit or trade-in, or even make a balloon payment closer to the end of the term.
- The next type of loan is a chattel mortgage. Being the most common form of finance, it encompasses charge over the vehicle or equipment that is to be financed. For businesses that operate on a ‘cash accounting’ basis, chattel mortgage lets them claim input tax credit from the GST for the expenses incurred.
- The next type is a lease under which you can lease the vehicle or equipment for an agreed amount and fixed period of time. At the end of the term a residual value is set to portray the vehicle's value. Under the lease rental agreement, even though the equipment is owned by the financial company, you can claim tax deductions for the rent paid under the lease provided that the equipment is being used to produce assessable business income. Once the term ends, you can either offer to purchase the equipment from the finance company or return it or trade it in for a replacement or then extend the term of the lease.
Other loan application situations
In some cases, a business might not have its financial records and reports in place for past financial year, but might still want to obtain the equipment for business operational purposes. A low or no document commercial loan can be considered in such situations from banks or finance lenders.
Personal finance companies and banks offer varies kinds of loans to obtain your equipment. The onus is on you to choose the apt loan for your business. The loan must be in accordance with your financial situation and aid in generating income and take the business from pillar to strength.