One of the things we’re going to talk about today are equipment loans.
What’s the maximum loan you can get for equipment?
There’s no maximum on equipment loans, it depends on the type of equipment and the person or the company’s ability to meet repayments and what they use equipment for.
So, there’s no real upper limit on it with finance mining equipment or that type of thing.
So it could be a business or it could be just someone who’s just for personal reasons?
What are the different ways of structuring the loan?
I’m not really a finance guru but I’m just trying to understand how you could do that.
There’s a lot of different ways of structuring the loan as seasonal payments, there’s a Balloon or a residual payment.
What’s a balloon or residual payment?
Okay that’s a deferred payment that’s a lump sum that’s due at the end of the loan which can reduce the regular repayments and it also increases the amount of interest payable on the loan so it can increase your tax deduction.
Just dumb that down for me. So, let’s say I borrow a hundred thousand.
The balloon or the residual payment could be twenty thousand.
So, since you pay off eighty thousand and then at the end I’ve got twenty thousand lump sum payment.
That can help with cash flow. But it’s best to take advice from your accountant or financial adviser.
Yes, because that’s going to have tax implications if that equipment’s for business right?
So, if you’re structured badly you can end up not getting a tax deduction?
Yes. That makes sense.
What’s the maximum loan term for an equipment loan?
Okay that can be taken out up to seven years depending on the age of the equipment involved, it may be shortened depending on the use of the equipment.
What I’m hearing you say is this, let’s say I go and buy an air conditioning widget machine that only lasts four years.
I can’t get a seven-year loan because it’s only got a four year life is that what you’re saying?
Yes, a four-year life cycle. Another example is like a digger that’s you’ve been used for rock breaking for example if it was just digging holes and dirt you may get up to seven years, but if it’s breaking rocks with the rock breaker you may get three years as a maximum term.
Okay so the useful life of the equipment determines the–
The term of the loan. Okay I’m with you on that. Now how much deposit do I need for an equipment loan?
Okay often that is determined by the type of equipment, the age of the equipment and what it’s been used for.
Okay all right. Are there any restrictions on the equipment I can borrow?
There is specialized equipment for example we did a loan for the company that measures metal anomalies down bore holes. Now its very specialized equipment, equipment used radioactive materials and that was a specialized loan that we had to give for them. So, there is restrictions yes.
Okay so what you’re saying is there’s a range of loans which you could probably get in multiple borrowers and lenders to give you yes but if it’s something very specialized you might have to go searching and find someone who leaned especially for them is that what you’re saying.
Okay all right I’m with you. All right so look if I’ve got an ABN and I’m registered for GST do I get a better rate?
Yes, you can do, and in most cases, you’d need to have an ABN and register for the GST to claim or maximize your tax claims like claiming the GST back on the purchase price, your depreciation and claiming your interest costs.
Of course, having a being proved that you at least earn what seventy-five thousand?
Having a GST registration so ABN and registered for GST and being registered a GST that’s going to show that you’re in at least seventy thousand dollars a year in turnover.
Okay all right there’s anything else I need to know about equipment loans you mentioned?
Just that you should always seek you know your accountants or financial advisors’ advice or talk to us on one 1-800-100-100.
If I want to give a free credit report because obviously, you’re from Free Credit Report?
You start the process by looking at your credit report and you can get one for free Freecreditreport.com.au.
Okay so I just hit the apply button or what?
Yes, and put in some enough information to identify yourself and we’ll get that to you.
And that’s free so even if I decided I want to learn that there’s no obligation or no charge.
No obligation at all.
Okay thanks Steve I appreciate that.