Commercial Lending

Financial Lease

Hire Purchase

Hire Purchase is where the borrower buys the equipment for the business and makes the repayments over a contractual period of time. The equipment is shown on the balance sheet as an asset and then interest component of the loan repayments is shown as an expense on the profit and loss statement.

Chattel Mortgage

This is similar to a hire purchase, but is designed for funding items for personal use. They are used most commonly for purchasing motor vehicle.

Financial Lease

A Financial Lease is a contract for business purposes where by the lessee has the use of the equipment for an agreed period of time whilst making payments to the lessor. The economic owner of the equipment is the lender, thus no depreciation deduction is applicable except for luxury car.

Novated Lease

This type of lease is a three way lease. This is generally between the lender, employer and employee. The employee signs a lease agreement with a financer, and then sub leases the goods to the employer. They then sign a Deed of Novation so that the employer makes the commitment to pay the lease payments while the employee is employed. If for any reason the employee is no longer employed by this employer, the Deed of Novation becomes null and void. The employee then becomes liable for the lease payments.

A Novated lease covers ALL of the costs associated with the item. i.e. Maintenance operating costs such as petrol, tyres, registration and insurance in the case of cars and all costs maintaining other items such as computers and office equipments.

Operating Lease

The Operating Lease is fully maintained lease generally including all servicing items and running costs of the goods during the lease term. The equipment is purchased by the lender and then lease to the business. This enables you to lease an asset without taking the risks associated with owning the asset or having to outlay any capital to purchase the asset.

Debtor Finance / Invoice Financing

Trying to expand your business? Invoice Finance can accelerate your business cash flow by turning credit sales into working capital to fund growth opportunities. The purpose of the finance is to give you access to immediate funds, without having to wait for the customer to pay the invoice. This is particularly beneficial to businesses in a growth period and committing more working capital to customer.

The cost structure is similar to an overdraft, where you pay a service fee and an agreed percentage rate, calculated on the amount of funding you require and the length of time your customer takes to pay the invoice. Business can rise up to 80% of the value of selected invoices.

Advantages of invoice financing:

  • It is not a loan therefore fixed assets used to support Bank loans are not affected.
  • Cash is usually made available within 2 working days and save administrative costs
  • Ability to increase sales and profits without the need for extra investment of capital.
  • Cash to invest in appreciating assets instead of non-productive money tied up in debtors
  • Cash available to take advantage of bulk buying opportunities or favourable terms for early payment
  • Cash available for contingencies
  • Debtor finance eliminates the need to offer customers discounts and incentives for prompt payment of accounts