Getting the right equipment finance for construction and infrastructure with Savvy

Finance broker Savvy writes, when you’re in business, you want to get as many advantages as possible. If you can get an edge on the competition, you take it.

Australia is committed to supporting construction and infrastructure projects, bolstered by onshore manufacturing and supply chains. That means we’re going to need more roads, rail, and transport vehicles than ever.

What do you need to get your project moving? Equipment. Frannas, trucks, material transfer vehicles, prime movers, earthmovers, automated plant, and consumables. When your business needs equipment, it will need sensible and flexible funding.

According to Savvy Managing Director and equipment finance expert Bill Tsouvalas, owning is a much more attractive prospect due to low interest rates and government incentives.

“Selecting an equipment chattel mortgage works much in the same way as a home mortgage. A financier lends you money to buy an asset. A mortgage is placed on that asset as security. Chattel mortgages are perfect for businesses that want to maintain cash flow without interruption. You can also add other expenses into the loan as your business is able to borrow more than the asset’s initial value.”

The same can be true with hire purchases, although your bank or lender will own the asset until the loan is paid off. This can be suitable for “off-books” accounting administration.

“Business can also take advantage of tax deductions on purchases and claim back the GST on activity statements, or it’s passed on by your lender in hire purchase. You can also claim back other expenses such as depreciation and interest on payments. This also means you’ll be eligible for the $150,000 instant asset write-off. Remember, this expires on the 31^st of December this year.”

Chattel mortgages are capped at a maximum of 10 per cent p.a., and businesses can access $1 million in loans for five-year terms.

“You’ll definitely get a more competitive rate, considering interest rates are at record lows at the moment,” Tsouvalas said.

Rates for leasing are also competitive. Leasing can be more ideal for businesses that need to update their equipment more regularly or need to ramp up or ramp down operations for seasonal or short-term projects.

“An operating lease is treated as operating expenses that leaves your capital free to spend on other needs. You hand back the equipment at the end of the lease. A finance lease on the other hand gives you the flexibility to purchase the equipment at the end of the lease term or hand back the equipment for new equipment,” Tsouvalas said.

“Whatever your business elects to go with, it will put your business ahead of the curve when the resurgence in manufacturing and construction happens post COVID-19. Make the most of these incentives and interest rates; they won’t last forever.”