Equipment Loans in Australia
Let’s talk about equipment loans in Australia. If you must know, equipment loans are created to help business owners to purchase large equipment such as heavy machinery and vehicles. It gives you the opportunity to use these equipment without paying for the entire cost right away.
How Equipment Loans Work in Australia?
Generally, when you apply for an equipment loan, you don’t need to present an additional collateral. Your loan is secured by the equipment itself. So the process is, you will get the funds from financial institutions or lenders and pay them back according to agreed terms. To date, this is the most common type of finance that majority of business owners are familiar with.
So what “equipment” would Qualify?
Essentially all equipment used in business has a form of finance. There might be a few surprises in there:
- Office equipment, including desks, chairs and fitout financing
- IT and computer equipment lease or finance
- Industrial Machinery loans
- Car loans, truck leases and novated lease
- Truck Trailers
- Earthmoving equipment loans
- Mowers/ Tractors finance for the contracting industry
- Medical practice loans for fitout or specialised equipment like dentistry chairs
Benefits of Equipment Loans in Australia
The Use of Latest Technology
With this type of loan, you are able to get the best technology that will improve your business operations. That gives your business more opportunity to grow and to earn exponentially. Plus, you’d eventually own the equipment.
You Can Easily Budget Your Expenses
When you get an equipment loan in Australia, it gives you a fixed interest rate for a specific period. With this, you are able to provide an accurate forecast of your business expenses. This allows you to budget more efficiently.
Most Equipment Loans in Australia are Flexible
You can choose equipment loans that are perfect for your current cash flow. You don’t have to worry about not being able to pay for it because it has been reviewed and studied even at the onset.
Questions You Should Ask When Choosing a Finance Institution or Lender
- What are the loan terms?
- Are there taxation benefits?
- Are there admin fees you need to pay on a monthly basis?
- What are the penalties?
- Can you make extra payments at any time?
Equipment Loan Rates & Terms in Australia
Generally, the interest rates on equipment loans are within 6 – 9%. Lower interest rates are granted to small businesses with good credit scores and are willing to pay huge down payment. The repayment term is around 1 – 5 years but it can extend to 10 years depending on the equipment. Apparently, this differs from one lender to another and you have to check which one is best for you.
How to Get Approved – Equipment Loan
Below are some tips before you apply for an equipment loan.
See How Much Money You Need
Before applying for a loan, you must have an idea about how much you need for your business. This means you need to provide realistic figure for the equipment that you’d like to purchase.
Check Your Credit Record
In addition, you have to see and review your credit record. This is vital if you want to get your equipment loan approved. If you have a bad track record, then there is a need to improve it first or to agree on special terms.
Prepare Necessary Documents for Your Equipment Loan in Australia
The typical documents required if you want to apply for an equipment loan are the following:
- Basic personal information
- Business information
- Invoice for the equipment
- Bank statements for 3 months
Others would require additional documents and it would be good if you prepare it before hand.
- Business tax returns
- Proof of business licenses
- Profit & Loss statement
- Business balance sheet
Choose Newer Equipment
If you want to get an equipment for your business, we suggest to eye for the newer models. Financial institutions and lenders would prefer that over the older ones. Generally, the latter would have a low resale value.
According to experts, it is also crucial that you understand the equipment that you wish to purchase. Learn how it can help your business. What are the extra expenses such as spare parts, insurance, storage etc. The more you are prepared, the more you can increase your chances of getting approved.
Looking for Equipment Insurance
Speaking of insurance, this is important when you purchase an equipment for your business. But how can you choose the best one?
As always, you should look for multiple options first. This is so you can compare rates and features of different policies. If you are unsure which one suits you best, then you can always seek professional advice from your broker or insurance agents. Remember to read all the terms and understand the conditions before signing anything.
Should You Buy or Lease Your Equipment?
It is also important to determine if you really want to own the equipment or if you just want to lease it. The main difference is that when you choose the leasing option, you are paying for the use of equipment and then hand it back after the term or take out another lease. If you are still confused on which options to take, it is better to ask the opinion of your accountant. Remember, there are other equipment finance solutions to consider.
If you are already decided about your equipment loan in Australia, contact MHF material handling finance so we can provide you the best business finance solutions according to your business capability and needs.