A loan secured by Specific Security Agreement is a type of lending facility used to finance business equipment. With a Specific Security Agreement, the customer owns the goods. The lender takes a fee over the goods as security.
Also known as a Chattel Mortgage, it works similarly to the traditional Commercial Hire Purchase (CHP) product. It has similar tax deductions and flexibility surrounding its terms and balloon payments. It has grown in popularity beyond the CHP due to a borrower's ability to claim back their full GST (input Tax Credit) upfront regardless of which tax system the business runs (cash basis or accrual basis).
Benefits of Specific Security Agreement
Ability to claim GST (Input Tax Credit) upfront on both cash & accrual basis
Up to 100% financing (including GST)
Full ownership of the equipment at the end of term
Flexible term and balloon payment options
Fixed Payments for ease of cash flow management
Attractive tax deductions of interest expense & depreciation
Commercial Hire Purchase
Obtain the business equipment and car you need through a Commercial Hire Purchase loan, and pay hire charges over a fixed period. In the CHP lending facility, the lender takes ownership of the asset being funded and hires it back through regular instalments. Once all payments are made to pay back the facility, the asset's ownership automatically transfers to your business.
Benefits of CHP
Full ownership of the equipment upon repayment of the loan
Flexible term and repayment options
Up to 100% financing (including GST)
Get the flexibility of repayment options under a CHP. You can choose to pay back in equal instalments, have a balloon payment at the end of the fixed term to reduce your monthly repayments or fully amortise over the term. You can also choose to put in a lump sum or have seasonal payments to suit your business cash flow.
Finance Lease
A finance lease is for the acquisition of an asset or equipment with payment structured over time. At the end of the term, there is an option to purchase the agreed residual value asset. However, if you wish, you can return the equipment back to the lender. The amount financed is calculated on the asset cost less GST, in most circumstances. The monthly rental amount is then subject to GST. These payments are sometimes fully tax-deductible, depending on your tax status and the circumstance of the business. Benefits of Finance Lease
Ability to purchase the asset at the end of the term or hand it back to the lender
