Equipment finance

What is equipment finance?

Whether you're looking to purchase a forklift to move goods in your warehouse or specialist medical monitoring machines for your private practice, equipment finance is on hand to help. There are different types of equipment finance. They include commercial loans, hire purchases, finance leases and novated leases. Choosing the best option for your business will depend on your financial situation, tax needs and budget.

How does an equipment loan work?

Equipment finance gives you access to whatever important business equipment you need without having to pay for it upfront. Instead, you can receive the funds you need from a bank or lender and then work to pay off your purchase over a set repayment period. In other words, you get all the benefits of ownership before you actually own the equipment. However, there are several different financing routes you can choose to go with, including taking out a business loan, a hire purchase, finance lease or novated lease. Read on to find out more about how each different type of equipment finance works.

What are the ways I can finance my business equipment?

• Commercial loan or equipment loan This is probably the type of finance most borrowers are familiar with. As a secured business loan, the asset you wish to buy will be used as security for the loan. This means that you own the item in question and can claim any interest charges and depreciation of the asset as tax deductions. Compare these loan types.
• Hire purchase This is where a financier purchases an asset on your behalf and then you buy it off them in instalments. Under this arrangement, the financier owns the asset until you have paid it off and ownership transfers to you.
• Finance lease A finance lease involves a lender purchasing the asset you want and then renting it out to a business for an agreed period. You can choose from flexible repayment terms to match your budget, while the rental payments you make are usually tax deductible.
• Novated lease A novated lease is where you enter into a finance lease with a financier, but instead of you making the repayments, your employer makes the repayments out of your pre-tax income. This is a form of salary sacrificing.

Equipment finance vs equipment lease

Which is better value?

If the equipment will be used for a long time and you have access to consistent cash flow, lending could be the way forward. Leasing might be better suited to companies with lower revenue and those seeking equipment that has a shorter life span. Short-term leases allow for expensive equipment to be changed every few years, with some agreements requiring that the lease provider update products regularly within the lease period.

How do I compare equipment loans?

• Find out the interest rate. The interest rate offered will obviously influence how much you pay over the life of your loan, so look for one that offers a low rate of interest. You'll also need to consider whether you want the security of a fixed rate or the possibility for saving that a variable rate offers.
• Compare the fees and charges. Whenever you sign up for any financial product, it pays to make sure you're aware of all the fees and charges attached to the deal. Read all product information closely to know if the finance option you choose attracts an establishment fee, early repayment fee etc.
• Establish if there are any taxation benefits. The range of equipment finance options are assessed differently when tax time rolls around. Each approach has its own potential tax benefits, so seek advice from your accountant to learn which one suits you best.
• What are the loan terms? How long can you take to pay off your asset? Terms typically range from 12 months to seven years, so look for equipment finance that offers a term suited to your financial situation.
• Are there flexible repayment options? How often does each vehicle finance option let you make repayments? Look for a solution that lets you schedule your repayments in a way that suits your budget.

The good and not-so-good of equipment finance

What should I be looking out for with equipment finance?

The main pitfall to avoid with equipment finance is getting into a financial agreement that you simply cannot afford to service. It's important to consider how essential any equipment is before you commit to a purchase, as well as make sure you're aware of your ability to make repayments on time. Another common issue is that some people can get confused by the array of equipment finance options available. Seeking assistance from your accountant is usually the best way to go to ensure you make the right choice.

What other questions should I ask?

• Which finance option should I choose? The right finance option for you will be influenced by a whole range of factors, including how you do your accounting and your approach to taxation, so seek help from your accountant to determine the best product for your needs.
• What fees and charges should I keep an eye out for? Read product documents closely to look for things like establishment fees, late payment fees and early repayment fees. It's also a good idea to keep an eye out for ongoing monthly or annual fees.

Equipment finance comparison

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Name	Product	Min. Loan Amount	Max. Loan Amount	Loan Term	Upfront Fee	Filter Values
ebroker Business Loan		$5,000	$5,000,000	1 month to 30 years	$0 application fee		Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.	Enquire now	Compare	loading Fetching your data...
Valiant Finance Business Loan Broker		$5,000	$1,000,000	3 months to 5 years	$0 application fee		A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.	Enquire now	Compare	loading Fetching your data...
OnDeck Business Loans		$10,000	$250,000	6 months to 2 years	3% of loan amount		Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.	Go to site More Info	Compare	loading Fetching your data...
Prospa Business Loan		$5,000	$300,000	3 months to 3 years	3% origination fee		Small business loans are available from $5,000 - $300,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $6,000 is necessary.	Go to site More Info	Compare	loading Fetching your data...

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