Commercial Purposes Equipment
April 15, 2016
The vast majority of equipment is financed via a chattel mortgage. As the name implies, the equipment loan is secured by a chattel (car, dump truck, front end loader) as opposed to real estate.
It is common for the lender to lend 100% of the purchase price of the equipment. If the equipment is specialised in any way, or the equipment is dated, or if the lender has any concerns regarding the borrower, they may seek a sizeable deposit as opposed to lending to 100% of the purchase price.
Generally the term of an equipment loan is 5 years, and sometimes 7 years. Utilising a final balloon payment of up to 50% of the equipment purchase price may be implemented to minimise repayments during the loan term.
This is only practical if the lifespan of the equipment is more than 5 years.
The borrower has the option of paying the final balloon payment (which would be sizeable), or refinancing the balloon amount over another term of approximately 2-3 years.
Equipment Finance loans do not have the ‘bells and whistles’ associated with home loans, i.e. 100% offset and redraw.
Other types of equipment finance include:
- Finance lease
- Operating lease
- Novated Lease
- Hire Purchase
Better Choice Mortgage Services is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within this website. While the information contained within this website is periodically updated, no guarantee is given that the information provided in this website is correct, complete, and up-to-date. Although the Better Choice Mortgage Services website may include links providing direct access to other internet resources, including websites, Better Choice Mortgage Services is not responsible for the accuracy or content of information contained in these websites. Links from Better Choice Mortgage Services to third-party sites do not constitute an endorsement by Better Choice Mortgage Services of the parties or their products and services. The appearance on the website of advertisements and product or service information does not constitute an endorsement by Better Choice Mortgage Services, and Better Choice Mortgage Services has not investigated the claims made by any advertiser. Product information is based solely on material received from suppliers. Advanced Finance (Pty) Ltd t/a Better Choice Mortgage Services are not financial planners or accountants and we would encourage our clients to seek professional advice before acting on any a financial or taxation information in this news post.