Which equipment finance option is right for me?

September 19th, 2017


In Australia, equipment finance makes up 34.2 per cent of total borrowing for Micro businesses, and 27.9 per cent for SMEs, according to East and Partners. Despite that, often times people aren't sure what equipment finance can do for them, nor which product will work best for their situation. Financing your equipment will allow you to keep your machines up to date and make the most of your available working capital.

Here at Earlypay we've just rolled out our new selection of equipment finance products. The two options we provide are a secured loan agreement (chattel mortgage) and a rental agreement (operating lease). But which is most suited to your situation?

Secured loan agreement

  • Own your asset straight away
  • Use the asset itself as security
  • Claim tax deductions on your equipment

A secured loan agreement is most easily compared to a mortgage. Once your loan application is approved, ownership of the asset will immediately fall into your business's hands. From then, you'll repay the loan at regular intervals for the agreed-upon term.

One of the biggest differences between this and a mortgage is that we will never use the equity on your home to secure your loan. At Earlypay, we believe that business assets should be used to secure business borrowing. The equipment itself acts as security on the loan.

As ownership of the asset passes to you immediately, you may be able to receive tax deductions. With a secured loan agreement, you can claim back the GST on the equipment's purchase price in your Business Activity Statement, assuming you use cash method accounting. You may also be able to claim the interest and depreciation of the equipment over time.

Free up your business cashflow by securing equipment finance.
Free up your business cashflow by securing equipment finance.

Rental agreement

  • Use a sale-back lease for a cash injection
  • Keep up to date with technological advancements
  • Claim GST on rental payments

With a rental agreement, we'll acquire the right equipment for you. In this arrangement, we hold ownership over the equipment, which we lease to you. This allows you to avoid the potential risks of total asset ownership.

If you're in need of a cash injection, we may be able to arrange a sale-back lease, where we purchase the equipment from you and establish a lease agreement.

Rental agreements are ideal for businesses which may be needing to regularly update their equipment. Since you don't own the asset, once your lease is up you can seek to update without the now-obsolete equipment being your responsibility.

Just as with the secured loan agreement, you'll be able to claim GST on your lease payments for equipment that generates assessable income.

Choosing the best option

At Earlypay, we offer personally tailored finance solutions to meet the needs of your business.

Which form of financing you choose should depend on the type of equipment you need, and how often it will need to be updated. At Earlypay, we assess all loan applications on a case by case basis, so are open to financing most types of equipment in any industry.

If you're seeking finance for your computing firm, for which the latest technology is likely crucial, you may prefer to acquire a rental agreement.

However, any equipment which is likely to last well and be a staple asset of your company (ie. vehicles or construction machinery) may be best financed through a secured loan agreement.

If you need further advice on selecting the best loan suited for you, why not get in touch with Earlypay today? With 30 years of experience under our belt, we offer personally tailored finance solutions to meet the needs of your business.

If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].