What is the Best Type of Equipment Finance for Your Firm?

Equipment finance is a convenient financing solution for businesses that need to buy new equipment. These solutions are also available for upgrading or replacing their existing assets. Firms can borrow the entire amount for procuring new equipment or upgrading an old one. Lenders provide different equipment financing solutions to help businesses optimise their operations. Let’s break down the types of equipment finance so you can choose the right one for your business!

Chattel Mortgage

A chattel mortgage is an equipment financing option that allows borrowers to secure money for outright ownership of the assets. The business owners can repay the loan amount over a period of  time. They need not submit their existing assets as collateral for this loan. The new equipment they procure acts as the lender’s security. If the borrower defaults, the lender can seize the new equipment to recoup their losses. This financing solution is perfect for the following businesses:

• Construction
• Transportation
• Real Estate
• Roadworks

Businesses in these industries use a chattel mortgage to finance cars, tractors, trucks, or other heavy machinery.

Hire Purchase Agreement

The hire purchase agreements allow businesses to borrow or hire a piece of equipment. You can claim the repayment expenses under tax exemption rules. Under this agreement, you do not get outright ownership of the asset. However, it allows firms to use these machines and equipment for all business purposes. If your business has cash flow issues, you can leverage predictable repayments with a hire purchase agreement. This form of equipment financing is perfect for firms that want a fixed repayment schedule.

Equipment Lease Agreement

This agreement works similarly to a hire purchase agreement. However, the business does not get eventual ownership of the asset. Instead, the equipment is merely leased from the owner. The firm may return the equipment to the lessor at the end of the contractual term. Alternatively, they may have the option to buy the asset at a lesser cost or extend the lease period.

This agreement works well for businesses that require short-term usage of equipment. Industries, where equipment depreciates quickly, will also benefit from such a contract.

Equipment Rental Agreements

This agreement is similar to an equipment lease but it provides more flexibility to the borrowers. The firm may return, purchase, rent, or upgrade its equipment once the rental period ends.

Businesses operating in industries with rapid technological changes prefer equipment rental contracts. These agreements allow them to save money and make the most of a piece of equipment without a long-term commitment. They also allow businesses to upgrade their technology quickly and with ease.

Which Equipment Financing Solution Should You Choose?

You can explore these equipment finance solutions to meet your business needs and goals. Business owners can also consult the Broc Finance team to understand various new and used asset and equipment finance options. You must assess your cash flow position, business goals, and equipment requirements before deciding on a financing solution. Speak to the Broc Finance team today to understand your options!