Uses of equipment finance
Using this form of finance removes the need to spend large sums on equipment by enabling you to essentially rent or lease items over a set period of the contract.
This form of finance can be used to acquire a range of expensive equipment, such as vehicles, forklifts, IT hardware, telephony systems, industrial machinery and other forms of plant and assets. This finance does not cover trade and operating expenses or property.
Equipment finance is particularly helpful for businesses that want to manage their cash flow, and finance companies may take into account seasonal cash flow variation when creating a finance payment plan.
Choose the right arrangement
Various types of equipment finance are available, including hire purchase, finance leases and equipment loans.
Hire purchase will suit a business that wants to eventually own the assets outright, although the finance provider owns the equipment until the contract is paid out. A deposit is usually not required.
An equipment finance lease is similar to a hire purchase arrangement, but rather than making payments with the goal of owning the equipment, the business negotiates a new arrangement at the end of the lease contract, and either continues leasing the existing item or opts to lease a new item. This enables a business to have access to the latest equipment without constantly spending capital.
Another option is an equipment loan (sometimes known as a chattel mortgage), which is a fixed interest loan secured by a mortgage over the asset. This arrangement has some tax advantages, in that GST is not paid on loan repayments.