If you have need or just a desire for a new motor vehicle, agribusiness equipment or yellow goods there are numerous options available to you to finance this purchase. Before making a commitment though, ensure you're purchasing it with an optimal funding source and in the right entity, these decisions can have a big impact on your future cash flow and realisation of business plans.
Funding sources to be considered
There are a lot of motivated retailers, manufactures and Banks keen to assist you to take possession of your new asset. Don't rush into your funding decision, take a step back and consider each option, you will be surprised how many are on the table.
- Retailer financing – depending on the level of motivation to make a sale, some retailers are offering finance for new equipment at very attractive rates. Be mindful that negotiating on the purchase price is very limited when using this finance and high interest rates may apply after a specified period of time which needs to be considered so that the funding can be extinguished from other sources prior to that time.
- Current Bank funding – it is often convenient and quick to turn to your existing business banking relationship to obtain new asset financing. If your relationship is strong, terms are typically quite competitive. Be mindful though that when financing a new asset with your existing bank, all other collateral, (e.g. property, company charges) will secure this asset finance and potentially reduce your access to working capital facilities in the future as the business grows.
- Asset specific financing – most financeable assets can stand alone in a finance arrangement, however they won't, due to an All Monies Clause, if they are in the same institution that has other collateral for other loans. The only way therefore to get the full benefit of Specific Asset finance is to go to an alternate funder from your primary core banker. This can be more time consuming but Equipment Financing Brokers can be very effective in this area.
Make the best asset financing decision you can by asking your Hanrick Curran Accountant do a comparison of ALL your options.
This article was published in the Summer 2012 Horizon. For a pdf version of the newsletter please click here.