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Starting and running your own business is an exciting and fulfilling endeavour, but for many new and established businesses, the financial costs and administration involved can be daunting.

Choosing the right type of equipment financing for you and your business is essential to your business success and growth. To save you time (and hopefully money) we’ve conducted extensive research and interviewed finance experts for this guide, designed to help you ensure your business has the right financial strategy in place.

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My business needs equipment but I don't have the cash, what are my options?

There are four common options for commercial equipment funding

1 Business Loan

A business loan essentially provides you with an amount of cash to spend on whatever equipment or resources your business needs.
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What is a Business Loan?

A bank or financial institution issues a business loan, either in the form of a fully drawn amount or an overdraft. There are hundreds of different business loan products on the market, all with different rates, terms and fees. Finding the best deal does require some research and shopping around.

The minimum business loan amount is on average $10,000 to $20,000, with some banks offering loans of up to $1 million to small businesses. Loans provided upfront will need a portion of the loan, plus interest paid back at regular intervals.

The repayment amount will depend on the term or length of the loan. The longer the loan term, the more total interest you will pay. Most business loans require security in the form of residential or commercial property or a guarantor.

Advantages

There are tax advantages to a business loan, as interest fees and charges on a business loan are tax deductable. Another potential advantage is the lump sum amount, which you are free to spend on anything, for example new equipment, paying employees or buying stock.

Disadvantages

If the business is not profitable enough to repay the loan, you can end up losing your home.

Bear in mind that banks are very conservative when lending money and typically a business will need over two years trading history to secure a loan.

Example

Carl purchases a new skid steer for $33,000.
Carl gets a $33,000 business loan from a bank.
He pays 9% interest rate $821 per month for 4 years.
Total will be $39,418 (includes $6,418 interest).
CARL CAN CLAIM 28.5% of the assets written down value each year.

2 Hire Purchase Agreement

A hire purchase agreement allows business owners to get the equipment and use it in their business while paying for the equipment in instalments.
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What is a Hire Purchase Agreement

A hire purchase agreement allows business owners to get the equipment and use it in their business while paying for the equipment in instalments. It’s worth bearing in mind that until the full amount is paid, the business does not own the equipment.

The agreement should cover a certain period of time (often between one to five years) with the last repayment in this period the customer legally acquires ownership of the equipment.

Advantages

Allowing a business to spread the cost of expensive items over an extended time period instead of paying the full amount upfront.

Hire purchase agreements are subject to GST, so come Business Activity Statement (BAS) time a business can claim the GST paid on the repayments of the hire purchase.

Disadvantages

It’s worth bearing in mind that until the full amount is paid, the business does not own the equipment. So, if the buyer defaults, the owner may repossess the asset. Hire purchase agreements are binding contracts, so if you choose to end the agreement early there will be a penalty.

Example

Carl purchases a new skid steer for $33,000.
He will repay $670 per month for 5 years.
Total will be $40,200 (includes $7,200 interest).
CARL CAN CLAIM a GST credit of $3,654.54.

3 Chattel Mortgage

Under a chattel mortgage a finance company lends money to a business and the business makes regular repayments the mortgage is removed once the loan is completed.
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What is a Chattel Mortgage?

Under a chattel mortgage a finance company lends money to a business and the business makes regular repayments the mortgage is removed once the loan is completed.

A chattel mortgage largely applies to motor vehicles, but can be used for other business equipment. Under a chattel mortgage, a finance company lends money to a business to purchase a transport vehicle or equipment and the business makes regular repayments.

Similar to a property mortgage, the financial institution lends the business the funds to purchase the vehicle or equipment so that the business owns the item. The mortgage is removed once the term of the loan is completed and any residual (balloon) value is paid.

Advantages

A chattel mortgage can be negotiated in terms of loan length, ranging from two to five years. Because this is a secured loan (secured by the vehicle or equipment), businesses can opt for 100% finance plus extras such as insurance so the initial outlay is nil.

You can also structure the loan so there is a large ‘balloon’ payment due at the end of the term so that monthly repayments are reduced.

Disadvantages

A chattel mortgage largely applies to motor vehicles, but can be used for other business equipment.

Example

Carl purchases a new skid steer for $33,000.
He pays 9% interest rate $706 per month for 4 years.
Carl will need to pay $6,600 (20%) in residual payment.
Carl will own the skid steer for $39,600.
CARL CAN CLAIM GST 100% up front on the value of the asset.

4 GoGetta's Rent.Grow.Own®

GoGetta purchases the equipment on your behalf and businesses pay a weekly rental while using it
After the short 12 month agreement, you can continue renting, return or purchase the equipment.
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What is GoGetta’s Rent.Grow.Own®?

Rent.Grow.Own funding solution for small to medium businesses and start-ups. GoGetta purchases the equipment on your behalf and businesses pay a weekly rental while using it. After the short 12 month agreement, you can continue renting, return or purchase the equipment.

GoGetta’s Rent.Grow.Own© is a unique funding solution tailored for small to medium businesses and start-ups. Unlike banks and other traditional lenders who focus on business history, GoGetta focus on a business’ future – it is all about potential.

Businesses can easily and quickly apply online for GoGetta financing for a wide variety of equipment including (but not limited to) trucks, trailers, cars, construction, earthmoving and agriculture. GoGetta purchases the equipment on your behalf and businesses pay a weekly rental while using it. After the short 12 month agreement, you can continue renting, return or purchase the equipment.

More flexible and straightforward than a business loan, the short 12-month contract means businesses are not locked in for years as is often the case with traditional funding options, giving you the opportunity to test and trial the equipment for business needs. GoGetta’s payments are 100% tax deductable and off balance sheet, so it shouldn’t affect the company’s ability to borrow from other lenders.

Advantages

Easily and quickly apply online.

100% tax deductible and off balance sheet, so shouldn’t affect the your ability to borrow from other lenders.

Provides a strong pathway to equipment ownership with each rental payment building equity in your equipment.

If you choose to purchase the equipment within the first year you’ll receive a 75% net rental rebate off the purchase price.

More flexible and straightforward than a business loan. Short 12-month contract giving you the opportunity to test and trial the equipment for business needs.

Disadvantages

Weekly payments may not always be suitable for all businesses. Always consider if your business will have a solid weekly cash flow to meet your repayment requirements.

Example

Carl purchases a new skid steer for $33,000.
He will pay $418 per week for the first 12 months.
All payments are 100% tax deductible.
CARL CAN CLAIM the gst and get a tax deduction on the payments he makes.
  • 1 Overview
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A detailed comparison of the distinct features of each type of equipment financing.

Highlight the best loan for...
PREREQUISITES
What's this? What is required as a prior condition to obtain a form of finance?
MINIMUM AMOUNT A BUSINESS CAN BORROW
What's this? Are you obligated to agree to a certain amount of funding?
LOAN TERM AND FLEXIBILITY
What's this? How long will you be paying back the finance & what are the terms of early exit?
FINANCE ASSETS OF ANY AGE
What's this? What is the maximum age of the asset you want to buy under finance?
TAX BENEFITS
What's this? When it comes to tax time, what can you claim?
GST IMPLICATIONS
What's this? How much GST can you claim on your chosen line of credit?
INTEREST RATE
What's this? How much interest will you pay over the life time of your finance option?
RESIDUAL / BALLOON PAYMENTS
What's this? Will you owe money to your financial institute after the term of your loan?
Business Loan
Hire Purchase Agreement
Chattel Mortgage
GoGetta's Rent. Grow. Own
  • Minimum ABN age of 2 years
  • 6 months business income statements
  • Minimum ABN age and credit history of 2 years
  • 6 months business income statements
  • Minimum ABN age and credit history of 2 years
  • 6 months business income statements
  • Start-ups and ABN of any age welcome
  • Proof of ID and work
  • $10,000 minimum
  • Application fees apply
  • No minimum
  • 100% of the equipment purchase price
  • Minimum $10,000 vehicle purchase only
  • A deposit can be made to reduce the loan amount
  • No minimum
  • 100% of equipment or vehicle purchase price
  • Bond of 4 weeks upfront rent required
  • 20-30% discount options after
  • 12 months
  • Application fees apply
  • 1-30 years
  • Payout fees apply
  • 1-5 years
  • Equipment can be purchased at any time during the term of a purchase hire agreement
  • Payout fees apply
  • 1-5 years
  • Payout fees apply
  • 12 - 48 months
  • Return, keep renting or create path to ownership
  • 75% net rental rebate if equipment is purchased in full within 12 months
  • Any age asset and any type of asset
  • Maximum 7 years
  • 7-12 years
  • Any age and any type of asset
  • Conditions of asset type apply
  • Business loans are tax deductable
  • Capital expenses can be claimed
  • Capital expenses on the GST exclusive value of the asset can be claimed
  • Interest and depreciation may be claimable
  • All rental payments are 100% tax deductable
  • GST is claimable on asset value at the start of the loan
  • GST is not claimable on repayments or interest
  • GST is claimable on the upfront equipment value and interest
  • GST is claimable on asset value at the start of the loan
  • GST is not claimable on repayments or interest
  • GST is claimable at the time of the contract and on weekly payments
  • From 4.39% - 12% p.a.
  • From 5%-15% p.a.
  • From 4%-20% p.a.
  • GoGetta is not subject to interest rates
  • No residual payments
  • Flexible residual payment options
  • Flexible balloon payments (30%- 70% depending on equipment type)
  • No residual payments