Tag: Broker

Financing Business Assets: Cash vs. Finance

Posted on by venrockfinance

When it comes to acquiring business assets, one of the crucial decisions you’ll face is whether to purchase them outright with cash or to finance them. Each option has its benefits and drawbacks, and understanding these can help you make an informed choice that aligns with your business’s financial strategy. Let’s delve into the different methods of financing and how they compare: buying outright, leasing, and using a chattel mortgage.

1. Buying Business Assets Outright

Advantages:

  • Full Ownership: Paying cash for an asset means you own it outright from day one. This can be particularly advantageous if the asset is expected to have a long useful life.
  • No Interest Costs: When you purchase an asset outright, you avoid interest payments that come with financing options.
  • Simplified Accounting: An outright purchase simplifies your accounting, as you don’t need to track interest, principal payments, or lease expenses.

Disadvantages:

  • Impact on Cash Flow: Paying in full can significantly deplete your cash reserves, which might be better used for other business needs or opportunities.
  • Missed Investment Opportunities: Using cash to buy assets might mean missing out on investment opportunities or potential returns that could have been gained from using those funds elsewhere.

2. Leasing Business Assets

Advantages:

  • Preserves Cash Flow: Leasing allows you to spread the cost of the asset over its useful life, which can help with maintaining cash flow and managing your budget.
  • Access to Latest Technology: Leasing can provide access to newer equipment and technology that might be prohibitively expensive to purchase outright.
  • Tax Benefits: Lease payments can often be deducted as a business expense, which can offer tax advantages.

Disadvantages:

  • No Ownership: At the end of the lease term, you don’t own the asset. Depending on the lease agreement, you might have the option to purchase it, but this usually involves additional costs.
  • Total Cost: Over the long term, leasing can sometimes end up being more expensive than buying outright, especially if you lease several times.

3. Chattel Mortgage

What is a Chattel Mortgage? A chattel mortgage is a type of financing arrangement where the business takes out a loan to purchase a tangible asset. The asset itself is used as security for the loan.

Advantages:

  • Ownership: Unlike leasing, with a chattel mortgage, you own the asset once the loan is repaid. This can be beneficial if you plan to use the asset for a long time.
  • Tax Benefits: You can often claim depreciation and interest payments as tax deductions, which can be financially advantageous.
  • Flexible Terms: Chattel mortgages often come with flexible repayment terms, allowing you to tailor the loan to fit your business’s cash flow.

Disadvantages:

  • Interest Costs: As with any loan, you’ll need to pay interest, which increases the total cost of the asset compared to buying outright.

Choosing the Right Option for Your Business

Deciding whether to buy an asset outright, lease it, or use a chattel mortgage depends on your business’s financial situation, growth plans, and the nature of the asset. Here are some key considerations:

  • Cash Flow: If maintaining cash flow is crucial for your business, leasing or a chattel mortgage might be preferable.
  • Asset Lifespan: For assets with a long lifespan, buying outright or a chattel mortgage might make more sense.
  • Tax Implications: Consider how each option impacts your tax situation and consult with a professional.

Speak with Professionals

Ultimately, the best choice depends on your specific circumstances. It’s wise to consult with your accountant and finance broker to analyze your financial situation, understand the implications of each option, and make a decision that supports your business goals.

Choosing the right method for financing business assets can have a significant impact on your company’s financial health and operational efficiency. By carefully evaluating your options and seeking expert advice, you can make a decision that aligns with your business’s needs and objectives.

First meeting with a broker

Posted on by venrockfinance

If you’re looking for a home loan but have not dealt with a mortgage broker before, attending your first appointment with a broker can be a nervous experience. Getting a home loan, after all, can be quite complex for a first-timer and there is a lot to learn. But there are many steps you can take to be confident that your appointment will be a success.

A good starting point is to familiarise yourself with the expectations of the first appointment between one of our friendly brokers and yourself. Your broker is very likely to ask you about your medium and long-term financial goals, the amount you want to borrow, comparisons of your home loan options and your understanding of the fees, costs and conditions attached to home loans. Knowing the direction the appointment will likely take – lets you participate more actively in the conversation. This means you can better articulate your needs to your broker.

It’s also recommended that you give some consideration before the meeting to the types of questions you wish to ask your broker. Questions that can be of use include such things as loan types (such as term, repayment options and interest rate types), the types of ongoing fees attached to various loans (such as early exit, late payment, break and redraw fees) and the typical timeframe for a loan settlement.

These questions might pop into your head spontaneously during the meeting but preparing them in advance is a good way to refine them. By doing so, you are in a position to get more specific information from your broker.

It is common practice, too, for your broker to conduct a needs assessment prior to your face-to-face appointment – so you may be asked some pre-appointment questions. To assist in answering these, you’ll need to supply information about your employment history, assets and expenses.

At the appointment it will save you time and effort to prepare and then bring the required documentation with you. This can include ID, transaction histories, tax returns, rental income statements and borrowing documents such as “contract of sale” and proof that you have the deposit for a property. It’s mandatory for brokers to maintain the confidentiality of information that you provide to them and only pass on information necessary to enable them to lodge your loan application or where required by law.

All Venrock Finance brokers are accredited, therefore you can attend the meeting knowing your broker is appropriately educated, adheres to a strict and professional code of practice and is authorised to access a large range of products offered by a variety of lenders.

To book an obligation free appointment today please contact Venrock Finance on 08 9557 0500 or admin@venrockfinance.com.au.

Financial Focus: Understanding Living Expenses

Posted on by venrockfinance

Applying for a new mortgage or looking to purchase a new car is an exciting time, however with the need for comprehensive credit reporting and tightening lending practices, it is imperative that consumers understand how their spending habits can impact on their capacity to access finance.

With more and more expenses being paid electronically, the banks have greater transparency on what exactly people are spending their money on and how much they are spending. Banks use this information to determine what surplus you have left to pay for the proposed finance. Additionally, the expenses that may be a luxury or a one off can also paint a picture on the desirability of you gaining an approval.

With all of this you need to be very mindful on what you are spending and ensure repayments are met on time. So when seeking a mortgage or car finance, work with a Venrock Finance broker who will gain an understanding of your discretionary spending and living expenses. As each bank has different policies our role is to navigate through the policies and find the bank that will say yes to your particular scenario, as while one bank may say no, the other lender may have a policy that includes a realistic understanding of your living expenses.

To discuss your requirements further please contact one of our friendly brokers today.