Access Machinery Finance

A chattel mortgage describes the financing arrangement where a borrower purchases a movable asset or property (chattel) by taking a loan from a lender. The chattel serves as security in case the borrower fails to pay the loan. It’s different from a typical mortgage, wherein the loan is taken against a fixed asset or property, like land or a home.

On the other hand, the ownership of the property in a chattel mortgage is transferred to the borrower right after the purchase, much like all mortgages. This is different with secured loans, wherein the borrower cannot legally own the purchased asset unless the loan is paid off.

In this type of equipment finance, the lender agrees to purchase the property needed by the business. The lender will let the business hire the equipment for a fixed monthly repayment over a specific period of time. In a CHP, the ownership belongs to the lender throughout that contract term, even though the business is in possession of the property. Only after all the dues (including the interest) are paid will the business legally own the equipment.

Commercial Hire Purchase is good for businesses that account for GST payments, whether on a cash or accrual basis, because you may be able to claim a tax deduction. It is also a good choice for businesses who want better cash flow.

Debtor Finance (or as it is sometimes known -Invoice Finance, Factoring, Receivables Finance or Cash flow finance) is a flexible working capital funding solution for businesses which releases cash tied up in outstanding customer invoices, bridging the cash flow gap between raising an invoice and getting paid.

Debtor Finance can help release the cash flow locked up in your outstanding invoices quickly by advancing up to 85% of what you’re owed from customers. The remaining 15% is returned to you when your customers pay their invoices. In this way, you can have access to the cash from your sales quickly, leaving you to get on with managing the growth of your business.

Risks, if your client doesn’t pay you (or the debtor financier if they are collecting on your behalf) within your normal trading terms say 90 days then the debtor financier has recourse to you and will require the discounted & unpaid invoice to be repurchased.

Debtor financiers normally finance invoices for goods or services that you have delivered and are not a progress payment claim, but there are exceptions from time to time.

A good example is discounting invoices for a labour hire business. The labour hire company has a contract to supply personnel, to their customer at an agreed hourly rate, for an agreed number of hours per week. The labour hire company has to pay its employee each week but might not get paid by their customer for 30 to 60 days from end of month. This cashflow gap could be very large if a large number of staff are being contracted out. With debtor finance, the labour hire company can get paid a percentage of their invoice within hours of raising the invoice.

Equipment leasing is ideal when purchasing equipment is simply impractical. Businesses that don’t need equipment year-round benefit the most from this, as well as operations that require frequent equipment upgrades. Aside from the huge capital investment, the equipment will incur depreciation cost and can be difficult to resell.

Equipment lease works the same way as CHP, except that the business won’t get to take the equipment at the end of the lease contract. It also makes the cash flow better for the business, plus you get to take away a huge chunk on your capital expense.

The true Operating Lease is an “off balance sheet” financing tool that only passes the benefit of use to the lessee; the lessor assumes ownership and residual value risks.

If the lease is cancellable, then it automatically qualifies as an Operating Lease. If the lease is non-cancellable, then the lease structure must pass the accounting standards AASB 117. A lease is a finance lease if it effectively transfers substantially all the risks and benefits incident to ownership. The substance of the transaction determined the classification.

Why would a customer want an Operating Lease?

• Multi-nationals and listed companies may have balance sheet constraints that would mean a finance lease or loan would impact return ratios, gearing ratios etc
• From a taxation perspective, the operating lease payments are classified as an operating expense and charged against profit & loss
• The company does not have to be concerned with equipment values at the end of the lease term, they are under no obligation to buy the equipment or to deal with the equipment
• The company may have capital expenditure restrictions
• The company may not want to own the equipment, but rather use it for a specific term and then return it
• We can finance not just the equipment but also professional fees, delivery & installation charges and all other costs associated with the equipment. Operating Lease can provide a 100% finance solution
• The Vendor lease does not use credit limit with the company’s main bankers, but is an additional source of funding
• The repayments can be structured to meet the customer cash flows.

Low doc loans are loans taken out by borrowers without the requisite documentation for standard or ‘full doc’ loans. These documents include tax returns, financial statements and any other proof of income documents, and it’s often banks that utilise these stringent document requirements.

If you’re missing these items, you can simply provide us with a Business Activity Statement and an accountant’s statement, and we can begin the process to securing a low doc loan.