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 "More Than Just Accountants"

Warning for business owners: Get advice before you lease

Businesses obtaining new equipment should seek professional advice about their finance options or risk damaging their bottom line, according to David Hodge from local accounting firm, HMA Twomey Patterson.

David Hodge, an Authorised Representative of Count Wealth Accountants / Count Financial Limited and Partner of HMA Twomey Patterson says, "The help of a professional financial adviser can mean the difference between making a right or wrong decision about whether to buy, lease or asset purchase."

“People should seek a number of quotes from several major financiers and then seek professional guidance that lets them recognise their options and ensures a good outcome, by allowing for tax implications and benefits.

Some finance brokers quote low interest rates.  However, brokerage makes the effective rate much higher.  David says, “To compare like with like, it is important that you compare the monthly repayments for the same asset value, residual payment and finance term”.

Every business has a different financial position, so it's not possible to generalise about the most effective way to finance your equipment.  To help you make your decision, you need to consider the benefits of leasing.

1.    Unused lines of credit.  Leasing and asset purchase may represent another type of financial commitment, however in most cases additional security is not required.  This leaves your working capital and lines of credit free for other business investment opportunities.

2.    Cash-flow.  100% finance is available.  Flexible repayment structures can be arranged to suit irregular cash flows.

3.    Known and fixed costs.  Most lease and asset purchase transactions are written on a fixed-term basis, thus ensuring that the future borrowing costs will be known in advance.  Unfortunately, many business enterprises have been caught in the situation of purchasing major capital equipment using lines of credit or overdrafts that are not guaranteed to be available for any length of time.

4.    Convenient.  Most financiers have standardised documentation and a quick approval process to allow funds to be raised in a matter of days.

5.    Partnerships/joint ventures.  Leasing, in particular, is a convenient way to share costs of equipment acquisition in a partnership or joint venture, thereby minimising the capital contributions of the partners.

6.    Almost anything can be leased or asset purchased so long as the asset is to be used (at least 50%) to earn assessable income.

7.    Almost anyone can lease.  Applicants can be Companies, Sole Traders, Trusts, Partnerships or Individuals.  You must have equity in a home and have tax returns for the last two years for your business.
”If your business requires new equipment, you can’t afford not to ask around for a variety of quotes that will help you make that very important business decision - whether to buy, lease or asset purchase,” says David.

'Count" and 'Count Wealth Accountants®' are trading names of Count Financial Limited, ABN 19 001 974 625.  Australian Financial Services Licence Holder Number 227232.

For further information:

David Hodge
HMA Twomey Patterson
Tel: (02) 6925 8377

1st Floor, Unit 1, 185 Morgan Street
Wagga Wagga NSW 2650.

WWW.HMATP.COM.AU