How to decide what is the best loan for your business.
First you need to know what you are buying.
When you decide to buy an asset for your business, you normally would seek help in acquiring finance for that asset.
It is extremely important to understand how this asset is going to be used in your business.
Is there a contractual need for that asset? Are you looking at renting this machine out to a third party?
How long will you hold on to this asset? Is the assets life cycle only for a few years? Will you need to upgrade this machine in a few years due to more advanced technology?
Whatever the reason may be; I would suggest you seek your accountant’s advice before proceeding, as there might be some tax implications that only they would be able to advise you on.
The following are the type of products we can accommodate for;
Chattel Mortgages (Secured Commercial Asset loans)
This is typically what most people take up when asking for a commercial asset loan. It is a secured loan against the asset. You own the asset from day one but are paying off the loan to the lender for the term of the loan. There are many tax benefits taking up this option. Once again speak to your accountant regarding first.
Operating Lease
This is an off-balance sheet product. It’s a leasing option, where the lender purchases the asset for you, and you lease this asset off them until you pay off the loan in your desired loan term. After that term you will completely own the asset outright. They have a buy-out option at the end of each year if you desire. Requesting a payout letter at each year anniversary will be the way you do it.
Rental
This is similar to the operating lease however after the term of the loan you have the option of either returning the asset to the lender or you would normally have a buy-`out option between 5% to 20% at the end of the term depending on the lender. This is ideal for customer that want to buy IT and Audio-Visual products (computers, Printers, Lighting, Audio etc.) where these products would normally be upgraded to new machines, because they may be out of date after the term of the loan. Some customers opt for a shorter loan term.
Business loans (Unsecured and Secured)
This is for businesses that need a cash injection. It can be both unsecured or secured against property (mortgages with enough equity) or a tangible asset you own outright (typically wheeled assets). The lender will assess you based on what you turnover on a monthly basis, and depending on the industry will provide you with funds up to 100% to 150% of your monthly turn over. Typically, these are higher interest for non-banks and lower rate with banks.