Equipment Loan Approval Checklist

We’ve compiled a handy equipment loan checklist for the most common types of documentation and what you need to do with them to fast-track your application and get approval quickly:



Complete application and loan forms

It sounds simple, however by filling out every required section of your application and loan documents with the most up-to-date and accurate personal and business information saves you tiresome emails and phone calls that extend the approval process.

It’s at this stage of the process, besides getting a competitive deal on your equipment finance, that having a broker really pays off. As your continued support throughout the application process and life of your loan they act as your liaison with your chosen lender and an aggregate for all your documentation, taking the stress of the application process off your shoulders.

Identification documents

When completing your application you will need to provide 100 points of identification including one photo ID, like a drivers licence. This is a system devised by the Australian government that rates Australian or state-issued identification documents on a points scale. Documents such as birth certificates and passports carry the most value at 70 points, while credit cards and Medicare cards carry the least at 25 points. These documents will most likely need to be verified. You can find a summary of who can do this for you here.

An ABN active for 6 months

Details of the equipment

As the equipment will act as security for the loan, it’s preferable to have as much detail as possible about the equipment you are looking to purchase. Information could include whether the equipment will be new or used and, if applicable, what the VIN, registration number, make and model are.

For loans greater than $200,000, also include:

Your assets and liabilities

The lender will want to know about any existing personal or business assets/debts that exist. Assets include things like savings accounts, stocks, investment properties, cars, business equipment etc. Your liabilities are the financial obligations that you have. They may be credit cards, existing loans, like home loans, car loans etc., and regular bills etc. It is worth keeping in mind that lenders will take into account you credit card limit, rather than your current balance.

A profit & loss statement

For loans greater than $200,000, the lender may wish to see a profit & loss statement, or a P&L, to give them a good idea of how your business is tracking from a profit perspective. A P&L should contain all of your income, such as sales, cost of the goods sold and your gross profit, as well as your expenses such as rent, wages, insurance etc. Your total expenses are deducted from your gross profit to give your your net profit.

Although each lender will vary slightly in their documentation requirements, you can know they will be looking to gather as much detail on your and your business’ financial situation as possible. Preparing as much of your documentation as you can before you apply means you can minimise your approval time and know you are answering questions on your financial situation correctly.

If you’re looking to find an equipment loan, FundingPro can help you compare a range of competing lenders, their rates and deals with one application. Apply now.

Using equipment finance can be key to business growth

Upgrading or obtaining new equipment can be key to business growth, whether it’s increasing efficiency or expanding your offering. However it’s important to make sure the equipment is acquired in the most financially advantageous way for your business.

There are three steps to making your equipment purchases more productive for your business now, and in the long-run:

  • Know the numbers and spend wisely. Ask yourself questions like; does this equipment help my business run more efficiently? Will it allow me to expand my customer base? Will it help me create new offerings? If you answer positively to these questions, the equipment will likely be money well spent towards generating new revenue.
  • Understand government schemes you can take advantage of. The Instant Asset Write-Off Scheme means you can instantly claim deductions for depreciating assets worth up to $20,000, which has been extended to June 30, 2019.
  • Use equipment finance to claim further tax deductions on interest payments while building equity in a business asset. When your business uses a loan to purchase a piece of equipment, the interest payments are tax deductible for the life of the loan. You can also pre-pay interest into subsequent financial years to claim in your current year. As a guide, the interest you pay plus the depreciation of the asset is tax deductible as to how your business uses the asset.

 

 

Financing equipment and vehicles also helps keep working capital in the business. So how could this work for you?

The great thing about vehicle and equipment finance is that the equipment acts as security for the loan,” advises James Watson, director at FundingPro, “This means you can borrow 100% of the equipment value and maintain your working capital at the same time. This also makes applying easy and funding quick. Being able to access the right equipment for your business, without being limited by how much spare cash you have, means you are able to unlock new opportunities and bring in more customers to create growth”.

Watson outlines another added bonus, “In addition to creating opportunities and taking advantage of tax deductions, any equipment you purchase is considered a business asset and can therefore help you gain funding in the future for further growth.

To give you an idea of how you could make equipment finance work for you, let’s look at Scott’s business:

Scott owns a bakery and is looking to upgrade his ovens. Instead of pulling cash from other areas of the business, or using his personal assets as security, he opts for an equipment loan where the new equipment acts as security. This way, Scott is able to take advantage of the Instant Asset Write-Off Scheme as the ovens are less than $20K and also claim the interest payments over the life of the loan. He is also able to serve customers faster and save on energy costs, allowing his business to generate more revenue and continue to grow.

There are as many uses for equipment loans as there are businesses in operation, including:

  • Vehicles and fleets
  • Updating worn or out-of-date technology or equipment
  • Factory or commercial machinery
  • Specialist equipment, including the medical and hospital sectors
  • Equipment and tools for trades
  • Construction and mining equipment
  • General office equipment including computers, printers and phones
  • Technology, including servers, laser cutters and 3D printers
  • Hospitality equipment such as appliances and kitchen tools
  • Retail tools such as point-of-sale equipment and CCTV cameras

When it comes to funding, it’s important for businesses like yours to consider how their purchases are serving their business’ growth. Strategic equipment purchasing, utilising tax deductions and considering equipment finance means your business can look forward to fresh revenue streams and growth opportunities without jeopardising the effectiveness of your surplus cash.

Getting fast, simple equipment finance is easy when you use the FundingPros. Contact us or apply now and a senior loan advisor will be in touch to tailor a loan for your business.

The information in this article is of a generalised nature, it is important that you obtain individual tax advice for your own small business.

 

Keep your business equipment up to date without losing your working capital

As a business owner, it makes sense that keeping income producing business equipment up to date is key to your efficiency and driving revenue. As technology develops at a faster rate, so too does the need for your business to regularly reassess revenue-generating assets in order to remain competitive.

On the other side of the coin, you can also see that regularly upgrading equipment means continual investment. It means locking down working capital in purchased assets which may become obsolete, hard to sell or costly to dispose of.

Fortunately, there are asset financing options to help you both increase productivity and free up cash. We’ll look at Michael’s business as an example.

Michael owns a commercial carpentry contracting business. He’s looking to add three more vans to his fleet in order to begin servicing new areas. He wants to take advantage of dealership sales, but does not want to tie up his working capital in multiple assets. He opts to finance each van with an equipment and vehicle loan, where the assets act as security for the loan. This way, Michael can instantly write-off the vans as they each fall under the $20k cut-off for the Instant Asset Write-Off Scheme whilst maintaining working capital in his business.

There are a number of approaches that, like Michael, you can take in financing equipment or vehicles:

 

 

Finance Lease

A finance lease means that the lender will purchase the equipment on your behalf. You will then pay the lease in instalments over a period of time. At the end of the lease you have the option of purchasing the asset (for a residual amount agreed at the beginning of the lease), trading in the asset for new equipment or simply ending the lease. If you look to purchase at the end of the lease, there is a risk that the asset will be worth less than the residual value.

Tax-time benefits of a finance lease:

  • Generally, you can claim the lease rental as a tax deduction
  • The lender pays the GST component, making your repayments lower

Operating Lease

An operating lease is best for equipment that becomes outdated quickly, for example, in information technology or health industries. Jonathan Raymond, Director of LendingPro, advises, ‘An operating lease is ideal for equipment that needs regular replacement and reduces the risk that you will end up owning obsolete technology. At the end of the lease period, you simply return the goods to the lender. Unlike a finance lease, the risk of the market value being less than the residual value lies entirely on the lender.’

Tax-time benefits of an operating lease:

  • Claim the full lease payments as a tax deduction, meaning you could pre-pay a portion of your lease before June 30, 2018 to minimise you taxable income
  • Like finance leasing, your repayments will be lower as the lender pays the GST component

Equipment and Vehicle Loans

Otherwise known as a Chattel Mortgage (a “chattel” is a moveable asset). An equipment or vehicle loan means the lender provides you the finance to purchase the asset which you will then own. The asset also acts as security for the loan, meaning there is less documentation and often no down payment required.

Tax-time benefits of equipment and vehicle loans:

  • Claim the interest payments on the life of the loan
  • Instantly write the asset off with the Instant Asset Write-Off Scheme for assets under $20k. There is no limit to how many times you can claim under the scheme
  • For assets over $20k, claim depreciation on the equipment as to how it’s used in your business

Consider doing an assessment of the equipment necessary to creating revenue for your business. Can you foresee it, or is it already, outdated by new models or technology? Are there new tools to do the same job more efficiently? And what sort of assets or equipment are your competitors using?

By utilising asset finance you are not limited by available cash in your business, meaning you are able to have an agile response to developing technologies in order to provide a competitive offering. You are also able to work smarter with what working capital there is by bringing forward deductible expenses. Each business’ needs are individual, FundingPro can help you determine what sort of asset finance can work for you. Learn more about Equipment Finance, apply now or call 1300 998 555 to speak to a specialist loan advisor.

The information in this article is of a generalised nature, it is important that you obtain individual financial advice for your own small business.