Business Finance

Finance Lease

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Boost your business with new assets without the upfront cost via a Finance Lease.

Allow your business to reap the benefits of new equipment or assets straight away without the upfront costs associated with purchasing outright.

What is a Finance Lease?

Finance lease is used to buy an asset such as equipment for the major part of its useful life. This type of loan allows the borrower to have the use of an asset and the benefits of ownership, while the lender retains ownerships of the asset until the end of the lease. Via a financial lease all risk is transferred to the borrower and as such it will often have a lower interest rate than other types of equipment finance.

How does a Finance Lease work?

When securing a finance lease, the goods are financed ex GST and have a balloon at the end of the term. When the term is finished, the lessee will obtain ownership of the equipment upon a successful ‘offer to buy’ the equipment. Traditionally this ‘offer’ is the balloon amount.

How long is the term in a Finance Lease

A finance lease can be structured from 1 -5 years and much have a balloon that is within ATO Guidelines.

Operating Lease vs Finance Lease

In a finance lease agreement, ownership of the asset is retained by the business at the end of the lease agreement, typically following the payment of a balloon or residual sum. Whereas at the end of an operating lease arrangement the asset or assets are returned to the lender.

What assets can be purchased under a Finance Lease?

A finance lease can only be used on new purchases or goods up to 5 years old at the time of purchase. Assets which can be purchased include:

  • Vehicles
  • Trucks
  • Farm & Agricultural equipment
  • Construction equipment
  • Heavy machinery

Advantages of a Finance Lease.

A finance lease is much more suitable to lease assets that will be used long-term, at the same time giving the user the rights of ownership. The lessee does not have to face a huge capital outlay, as when purchasing the vehicle or equipment outright. Here, the rentals paid clear off most of the capital so taking ownership of the vehicle at the end of the agreement comes at an affordable cost.

Is my business eligible for a Finance Lease?

You will need to prove to the lender that you can meet the ongoing repayments of a finance lease. To do so, you should be able to provide:

How do I apply?

If you would like to know more or need assistance determining the best equipment financing solution for you, one of our experienced finance consultants are happy to assist, contact us today.

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