Hire Purchase and Leasing

The best way to structure asset finance for a particular business is usually best advised by the accountant handling the financial affairs for that business. Different Finance products can deliver differing results to a business's bottom line especially in regards to taxation issues.

The main types of asset finance products for a business are finance lease, operating lease, chattel mortgage, novated lease and factoring or receivables finance.

Commercial Hire Purchase is a contract where the financier (owner) allows the borrower (hirer) the right to possess and use a car or other vehicle or equipment in return for regular payments. A balloon payment is a final payment made at the end of the term and ideally this payment should be no more that the estimated value of the item at that time is optional with a commercial hire purchase agreement if it is preferred to reduce monthly repayment amounts. When the final payment of the commercial hire purchase is made, the title to the goods is transferred to the hirer. A hirer also usually has the option to purchase the hired goods prior to the end of the term of the contract.

Finance Lease provides up to 100% finance for the acquisition of plant or equipment to be used by the business. With a finance lease the ownership of the goods remain with the lender who claims depreciation of the asset.

Operating Lease is an agreement to rent plant or equipment for business use normally for a predetermined period. The equipment is either returned to the financier at the expiration of the agreed lease term or an offer to purchase the goods for a mutually agreed price may be possible in many instances. Operating leases can be attractive to businesses who operate fleets of vehicles for example.

Chattel Mortgage is a finance agreement where the borrower owns the vehicle, plant or equipment during the period of the loan. It is possible to usually claim both the depreciation and the GST that was included in the purchase price initially. This is one of the more popular and arguably the most common form of asset finance that is used especially for business purposes at present.

Novated Lease is a convenient and flexible way for employers and employees to jointly finance motor vehicles as part of a salary package arrangement.

Factoring or Receivables Finance is designed for businesses with high sales to debtors ratios which has an effect on limiting cash flow. Factoring or receivables finance can provide businesses with up to 80% of the value of their invoice total with the remaining payable following payment by the customer who was originally invoiced. Receivables or factoring finance can provide businesses with quick access to the cash tied up within their approved credit sales invoices.

Many of our banks and specialty home loan lenders are able to provide finance for business purposes at home loan interest rates and in the event Ability Finance are unable to assist you directly we are able to refer you on to organisations and professional contacts who can assist you.

Ability Finance specialise in saving individuals and businesses both time and money by shopping around for the loan or finance product that will best fulfil your needs then assisting borrowers to apply for and gain approval and subsequent settlement for the selected loan or finance product. Ability Finance are finance broker specialists and are not involved in giving out financial planning advice to individuals or businesses. Always seek independent professional advice when considering any type of loan or finance.