Effective equipment finance can be the key to businesses unlocking their full potential and realising improvements in productivity, increasing profitability and undertaking larger projects and orders. Financing may be required to acquire new plant, machinery and equipment in order to achieve these objectives. The beginning of the financial year can be an ideal time to seek new finance and re-set the business to take on new opportunities as they present through the coming 12 months.
As the economy re-sets post-pandemic and hopefully supply chain issues resolve, new projects and opportunities should arise across many sectors. But challenges and uncertainties will still exist as costs and inflation surge and other conditions emerge.
To be workable and support the business rather than be a burden, any finance must be secured at the cheapest interest rates and with terms and repayments that work with cash flow. Cheap interest rate equipment finance which is structured to meet specific business requirements can be sourced through specialists, Jade Equipment Finance.
With lending rates on the rise it is increasingly important for business owners to prioritise how they can achieve the cheapest equipment finance interest rates. Equipment purchases can represent significant investments and finance contracts extend over long periods. Any reduction achieved on the interest rate at the outset, when the finance contract is sourced, can add up over the finance term to significant savings.
To achieve these objectives, business owners can consider a range of strategies including:-
- Careful selection of bank or non-bank lender.
- Selection of equipment finance product to suit the business set-up.
- Structuring finance to work with cash flow and deliver desired outcomes.
- Securing cheaper interest rates.
- Considering benefits to be realised through taxation measures.
Selection of Bank or Non-bank Lender
Finance for equipment acquisitions can be sourced through a range of lenders including the Big 4 major banks, smaller banks, finance companies, manufacturer and dealer finance and specialist non-bank lenders accessed through our broker services.
Banks are an important source of financing for many purposes. But in many cases, the banks are constrained by their banking status and guidelines and are not in a position to negotiate on rates, terms and conditions.
Dealer finance can be convenient as it is secured at the point of purchase. But likely it is supplied through a large finance corporation and again, with little prospect of negotiations.
Our specialist non-bank lenders offer the prospect of flexibility and negotiating on interest rates. They also offer financing that may not be readily available through major banks - Low Doc and No Doc Equipment Loans.
Accessing this sector of the lending market can only be achieved through a broker such as Jade Equipment Finance. Our accreditation with over 40 lenders provides vast choice for our customers. Choice which can result in cheaper rates and more tenable terms and conditions.
So if you’ve always just rung the bank for financing, perhaps 2022/23 represents the time for a change-up and a broader consideration of the options available.
Selection of Equipment Finance Product
Business have a number of options when it comes to finance products. The selection includes Chattel Mortgage (aka Equipment Loan), Equipment Lease, Rent to Own and Commercial Hire Purchase (CHP).
While opting for a finance product which has the lowest interest rate, which is typically Chattel Mortgage, may appear the sensible choice, it may not be the best fit with the business set-up. Each finance product has varying features which will be suited to benefit varying business structures.
Referring to the accountant which handles the business’ accounts in assessing suitability of finance product for a business is highly recommended. This can be an important decision with impacts not only in this financial year but over the full term of the finance.
Equipment Finance Structure to Suit the Operation
If the equipment finance is not structured to suit the business, especially in regard to monthly repayments and anticipated cash flow, then it is unlikely to assist the business to achieve performance improvements. Securing the financing structure that supports rather than burdens the business can go back to choice of lender and choice of finance product.
Lenders that are flexible in structuring finance may approve a loan amount, balloon or residual or finance term that better suits the business. Business owners can use our Equipment Finance Calculator to establish their preferences for these loan aspects prior to briefing our consultants to negotiate with lenders.
Securing Cheaper Equipment Finance Rates
The 22/23 financial year has commenced in a rising interest rate scenario. The RBA started hiking rates in May and is expected to make further increases to the cash rate through 2022. This means interest rate increases across lending markets.
When lending rates were historically low in 2020 and 2021, complacency may have set when sourcing finance. But as those rates creep up, reality is overtaking complacency. Time to focus on ensuring you achieve the cheapest financing rates possible.
We secure fixed interest rate financing on equipment loans and that ensures that the repayments will remain unchanged over the full period of the finance term, regardless of RBA decisions.
When reviewing what rates are on offer, be aware that the lowest rate will usually be applicable for new equipment purchases and for good credit rated businesses. Buying second hand equipment may attract a higher rate.
Keeping your credit rating in a good score range will contribute to being offered better rates. Small businesses especially sole traders may also have their personal credit score included in the loan assessment. Don’t overlook how to improve your credit score to achieve better rates.
Consider Benefits Available through Taxation Measures
Tax deductions represent a reduction in taxable income. Effectively a savings. Take into account the benefits on offer to suit your business. Specifically, the benefits available through temporary full expensing in this financial year. Chattel Mortgage is best suited to this tax measure.
Effective financing can be achieved, especially through Jade, to support and assist businesses achieve goals and targets in this financial year. Consider your options closely to ensure you achieve the best outcomes.
To discuss effective equipment finance for 22/23 fin year, contact Jade Equipment Finance on 1300 000 003
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
