When businesses are looking for finance, their immediate reaction is to go to their bank in many cases. However, banks are generally slow, ask for way too much information, and rarely have little understanding of business and how it operates. Furthermore, once the finance commences, they offer no support in managing the contract. In other situations, customers use the dealer finance option to provide the finance, whose primary focus is to help sell the asset, not offer tailored finance solutions or long term support to the customer.

This is where the role of the Asset Finance Broker steps in! Professional asset finance brokers first listen to the customer’s needs and then find the best solution from the myriad of financing options, saving them time, money and ensuring they have access to the best products available. Then, once the finance commences, brokers help clients manage their finance contracts for the life of the term.

For this reason, many accountants partner with Asset Finance brokers to ensure their customers receive more personalised service & financial solutions with the best interest of the customer in mind. Further to this, with the Accountant and broker sharing required information behind the scenes, the Client does not need to run around requesting and collating documents for finance approval.

Therefore, the partnership between Accountant & Broker results in the Client accessing better finance solutions with significantly less effort from the Client. The broker can also provide all the required documents to the accountants, streamlining the bookkeeping and accounting for the Client’s asset purchase.

At Equipfin, we offer high-value solutions; there is more to finance than simply asking about the interest rate.  We take the time to ask the Client the right questions to gauge an understanding of their car and equipment finance needs.

Equipfin offers a finance partner program to Accountants to provide their clients with specialised car and equipment finance solutions. There are many advantages of the program:

• Save clients time & money from shopping around for finance options
• Educate customers on what they need to consider before entering into finance contracts
• Structured finance solutions to meet a variety of needs
• Access to discounted interest rates
• Dedicated Client Service Officer
• Equipfin provides all the tax-related finance documentation to the Accountant.

If you would like to learn more about the advantages of finance partnering with the Equipfin team, call on 1300 959 144 to discuss supporting your business in 2021.

Every businesses situation is different; therefore, there is no single correct answer to this question. However, there are some basic principles that customers need to understand when deciding whether to pay out the contracts early or faster:

1. Equity in equipment ties up cash – There are many other options for using capital for a business that provides a positive “return on investment”. If you choose to pay off your loan quickly and decide you need that capital in the future, it is very difficult (or expensive) to release that capital for other purposes.
   
   
2. Most fixed-term Equipment finance contracts charge penalties for early termination. Suppose you pay off an equipment finance contract early. In that case, most financiers will retain a proportion of the future interest as a penalty for paying out early, therefore significantly negating the advantage of paying out early.
   
   
3. Interest expense is tax-deductible – In most circumstances, the interest (or a proportion of it) is tax-deductible. By paying out your contract early, you will reduce your tax-deductible expenses.

One of the biggest mistakes is that the business goes through a good financial period and feel the need to “clear out” some debt. Then, there is a downturn in the market, or there is some negative impact on the business, and they don’t have the cash surplus to withstand the downturn.

Many businesses have the cash to pay for equipment. Still, they choose to finance the equipment as they understand the importance of conserving cash flow and “leverage” the business financially.

There is more to financing equipment than being quoted a monthly repayment. A good finance company or broker should provide businesses with a tailored finance solution that meets various needs.

Many businesses often make a decision based on the interest rate or the monthly repayment. While this is an important factor, the “right” finance solution looks at the type of equipment, how it is used, the future of the business, banks credit restrictions, the strength of the customer finance application, and other factors.

The art in tailoring a finance contract is to understand a customer’s short and long term needs and find a balanced solution that considers all the factors that can impact the effectiveness of the finance contract.

Entering into a finance contract that is not tailored to your needs can result in cash flow pressure or incur opportunity costs of a poorly structured contract.

For Example: A successful sole trader excavator operator wants to upgrade his excavator and he has good cash in the bank and earns a good income. He is thinking of putting in a large deposit and paying it off quickly (i.e. over three years).

This may sound like a good idea on the surface, but it may not meet his longer-term needs when we dig deeper into his situation.

After a brief conversation, we find out he does not own a house and is planning on buying something in the next 18 months, and the contract he is currently working on is due to finish at the end of the year.

Therefore, his decision to use his cash as a deposit reduces his funds that he could use to buy his house. Also, the short term on his equipment finance contract creates a high repayment, therefore reducing his capacity to borrow on his future home loan application. In addition to this, his contract finishes shortly may create some uncertainty around his cash flow position in the future.

The client ended up not putting in any deposit to conserve his cash and financed over a longer term to keep his payments to a minimum.

Like any aspect of business, planning plays a vital role in finance and related car & equipment purchases. Too regularly, customers miss opportunities to buy an asset or miss out on a special price simply because they were not in a position to pay for the equipment quickly enough.

Organising a finance pre-approval at least a few weeks in advance allows for possible delays in the application process and ensures you are in a position to buy as soon as you find the right asset.

Finance pre-approvals are generally valid for about three months.  Please don’t leave the pre-approval process until the last minute, as it not only puts unnecessary pressure on you but exposes you to the additional cost of missing out on the equipment and potentially paying a higher price.

True Example: A Customer enquired about finance, with no immediate intention to buy some equipment. The benefit of a “No-obligation” pre-approval was explained, of which he agreed, applied, and was subsequently approved. Initially, he was not going to buy anything for 3-6 months. However, three days after the approval came through, he met someone who was closing down their business, and he had the chance to buy the equipment at a 50% discount, but he had to pay for the equipment within three days.

Because he was already pre-approved, he was able to organise payment in the required time frame, subsequently saving approximately $30,000.